The average price of a gallon of gas in 2018 increased $0.30 (12.4 percent) from $2.42 in 2017 to $2.72 in 2018. Let's see whether these changes are reflected in the income statement of Bronze, Incorporated for the year ended December 31, 2018 (amounts in billions). Revenues Costs of Purchased Crude Oil and Products Other Operating Costs Income before Income Tax Expense Income Tax Expense Net Income 2018 $ 252 144 76 32 9 $ 23 2017 $ 214 115 86 13 $ 13 Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a sustained trend, is Bronze likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Did Bronze do a better or worse job of controlling expenses other than the costs of crude oil and products in 2018 relative to 2017. 3. Bronze reported average net fixed assets of $366 billion in 2018 and $364 billion in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2017? 18 or 4. Bronze reported average stockholders' equity of $176 billion in 2018 and $172 billion in 2017. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 or 2017?
The average price of a gallon of gas in 2018 increased $0.30 (12.4 percent) from $2.42 in 2017 to $2.72 in 2018. Let's see whether these changes are reflected in the income statement of Bronze, Incorporated for the year ended December 31, 2018 (amounts in billions). Revenues Costs of Purchased Crude Oil and Products Other Operating Costs Income before Income Tax Expense Income Tax Expense Net Income 2018 $ 252 144 76 32 9 $ 23 2017 $ 214 115 86 13 $ 13 Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a sustained trend, is Bronze likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Did Bronze do a better or worse job of controlling expenses other than the costs of crude oil and products in 2018 relative to 2017. 3. Bronze reported average net fixed assets of $366 billion in 2018 and $364 billion in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2017? 18 or 4. Bronze reported average stockholders' equity of $176 billion in 2018 and $172 billion in 2017. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 or 2017?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The average price of a gallon of gas in 2018 increased $0.30 (12.4 percent) from $2.42 in 2017 to $2.72 in 2018. Let's see
whether these changes are reflected in the income statement of Bronze, Incorporated for the year ended December 31, 2018
(amounts in billions).
Revenues
Costs of Purchased Crude Oil and Products
Other Operating Costs
Income before Income Tax Expense
Income Tax Expense
Net Income
2018
$ 252
144
76
32
9
$ 23
2017
$ 214
115
86
13
$ 13
Required:
1. Compute the gross profit percentage for each year. Assuming that the change from 2017 to 2018 is the beginning of a
sustained trend, is Bronze likely to earn more or less gross profit from each dollar of sales in 2019?
2. Compute the net profit margin for each year. Did Bronze do a better or worse job of controlling expenses other than the
costs of crude oil and products in 2018 relative to 2017.
3. Bronze reported average net fixed assets of $366 billion in 2018 and $364 billion in 2017. Compute the fixed asset
turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or
2017?
4. Bronze reported average stockholders' equity of $176 billion in 2018 and $172 billion in 2017. The company has not issued
preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for
stockholders in 2018 or 2017?
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