Chapter 2, Problem 2.8E

Income Statement Ratio

The income statement of Holly Enterprises shows operating revenues of $134,800, selling expenses of $38,310, general and administrative expenses of $36,990, interest expense of $580, and income tax expense of $13,920. Holly’s stockholders’ equity was $280,000 at the beginning of the year and $320,000 at the end of the year. The company has 20,000 shares of stock outstanding at the end of the year.

Required

Compute Holly’s profit margin. What other information would you need in order to comment on whether this ratio is favorable?