1. If the sales = $42,000 and cost of goods sold is 65% of sales , calculate the gross profit (2 marks)

2. Given Sales is $120,000 and Profit Margin ratio is 23% calculate the Net Profit (2 marks)

3. Below are the ratios of Ali footwear firms for three years.

2016

2015

2014

Profit margin

28%

25%

22%

Return on Equity

45%

33%

30%

Calculate the average Profit margin and Return on Equity for three years.

If the Industry average for Profit margin is 28% and Return on Equity is 35%, compare the above ratios are favorable/unfavorable for Ali Footwear and why.

What does Profit margin ratio means to you?

Recommend two ways to company to increase profit? ( 6 marks)

4. Given total sales of $200,000, total assets of $180,000, shareholders equity $150,000 and net income of $50,000, calculate :

a) Profit margin.

b) Return on Assets

c) Return on Equity (