In its income statement for the year ended December 31, 2007, Knitz Company reported the following condensed data.

Administrative expenses $435,000 Selling expenses $ 690,000 Cost of goods sold 987,000 Loss on sale of equipment 83,500 Interest expense 68,000 Net sales 2,350,000 Interest revenue 45,000 Instructions

(a) Prepare a multiple-step income statement.

(b) Calculate the profit margin ratio and gross profit rate.

(c) In 2006 Knitz had a profit margin ratio of 9%. Is the decline in 2007 a cause for concern?