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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
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 2018. Let's see whether these changes are reflected in the income statement of Gonzalez Industries for the year ended December 31, 2018. 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 2018 $ 105,000 2017 $ 127,500 62,500 42,500 73,500 54,000 36,500 38,000 550 500 5,450 1,500 $ 3,950 15,500 5,500 $ 10,000 Required: 1. Compute the gross profit percentage for each year. Assuming the change from 2017 to 2018 is the beginning of a sustained trend, is Gonzalez likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Did Gonzalez do a better or worse job of controlling operating expenses in 2018 relative to 2017? 3. Gonzalez reported average net fixed assets of $54,700 in 2018 and $45,600 in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017? 4. Gonzalez reported average stockholders' equity of $54,500 in 2018 and $41,300 in 2017. 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 2018 than in 2017? 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. Note: Round percentage values to 1 decimal place. 1-b. Assuming the change from 2017 to 2018 is the beginning of a sustained trend, is Gonzalez likely to earn more or less gross profit from each dollar of sales in 2019? 1-a. 2017 gross profit percentage 1-a. 2018 gross profit percentage 1-b. Likely to earn in 2019? % % < Required 1 Required 2 > Show less
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