Chapter 5, Problem 5.7E

(a)

To determine

Gross profit rate is the financial ratio that shows the relationship between the gross profit and net sales. Gross profit is the difference between the total revenues and cost of goods sold. It is calculated by using the following formula:

$\text{Gross profit rate}=\frac{\text{Gross profit}}{\text{Net sales}}\times 100$

Profit margin measures the amount of net income earned from each dollar of sales revenue generated by a company. Thus, it shows the relationship between the net income and net sales. It is calculated by using the following formula:

$\text{Profit Margin}=\frac{\text{Net}\text{income}}{\text{Net}\text{sales}}\times 100$

To Compute: The missing amounts of Company Y and Company N.

(b)

To determine

To Calculate: The profit margin ratio and gross profit rate of Company Y and Company N.

(c)

To determine

To Discuss: The relative profitability of the two companies from the above data.