Using the income statement for Times Mirror and Glass Co., compute the following ratios: TIMES MIRROR AND GLASS COMPANY Sales $ 244,000 Cost of goods sold 135,000 Gross profit $ 109,000 Selling and administrative expense 47,900 Lease expense 18,200 Operating profit* $ 42,900 Interest expense 8,300 Earnings before taxes $ 34,600 Taxes (30%) 13,840 Earnings after taxes $ 20,760 *Equals income before interest and taxes. The total assets for this company equal $240,000. Set up the equation for the Du Pont system of ratio analysis. Compute the profit margin ratio?
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
| TIMES MIRROR AND GLASS COMPANY | ||
| Sales | $ | 244,000 |
| Cost of goods sold | 135,000 | |
| Gross profit | $ | 109,000 |
| Selling and administrative expense | 47,900 | |
| Lease expense | 18,200 | |
| Operating profit* | $ | 42,900 |
| Interest expense | 8,300 | |
| Earnings before taxes | $ | 34,600 |
| Taxes (30%) | 13,840 | |
| Earnings after taxes | $ | 20,760 |
| *Equals income before interest and taxes. |
The total assets for this company equal $240,000. Set up the equation for the Du Pont system of ratio analysis. Compute the profit margin ratio?
Du Pont system of ratio analysis:
A chemical manufacturer , Du Pont Corporation created a financial model for detailed analysis of the company's profitability.
Return on Net Assets or RONA is the measure of the business's operating performance.
RONA = = X X
It is a product of the asset turnover, gross profit margin and operating leverage.
Data given::
Sales = $244,000
Gross Profit = $ 109,000
EBIT = $42,900
Net Income = $20,760
Net Assets = $240,000 (Assumed Net Assets = Total Assets)
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