According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2016 $115,000 67,500 47,500 37,500 650 9,350 2,000 $ 7,350 2015 $142,500 77,500 65,000 40,000 550 24,450 6,500 $ 17,950 Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2015 to 2016 is the beginning of a sustained trend, is Computer Tycoon likely to earn more or less gross profit from each dollar of sales in 2017? 2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Computer Tycoon did a better or worse job of controlling operating expenses in 2016 relative to 2015. 3. Computer Tycoon reported average net fixed assets of $55,700 in 2016 and $46,600 in 2015. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2016 or 2015? 4. Computer Tycoon reported average stockholders' equity of $55,500 in 2016 and $42,300 in 2015. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2016 than in 2015? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 1-a. Compute the gross profit percentage for each year. (Round your answers to 1 decimal 1-b. Assuming that the change from 2015 to 2016 is the beginning of a sustained trend, is more or less gross profit from each dollar of sales in 2017? Gross Profit Percentage 2015 % 2016 % 1-a. 1-b. Likely to earn in 2017? More Gross Profit OLess Gross Profit Required Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 2-a. Compute the net profit margin for each year. (Round your answers to 1 decimal place. 2-b. Did Computer Tycoon do a better or worse job of controlling operating expenses in 20: 2-a. 2015 Net Profit Margin % % 2016 2-b. Controlling operating expenses in 2016 vs 2015? Better Job Worse Job Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 3-a. Computer Tycoon reported average net fixed assets of $55,700 in 2016 and $46,600 il turnover ratios for both years. (Round your answers to 2 decimal place.) 3-b. Did the company better utilize its investment in fixed assets to generate revenues in 2 3-a. Fixed Asset Turnover 2015 2016 3-b. Investment better utilized? O 2015 O2016 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 4-a. Computer Tycoon reported average stockholders' equity of $55,500 in 2016 and $42,3 issued preferred stock. Compute the return on equity ratios for both years. (Round your an 4-b. Did the company generate greater returns for stockholders in 2016 than in 2015? Return on Equity (ROE) 2015 % 2016 % 4-a. 4-6. Greater returns generated in 2016? OYes ONO
