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 2016 2015 Cost of Goods Sold $107.000 $130,500 63,500 Gross Profit 74,300 43,500 Selling, General, and Administrative Expenses 56,200 36,700 Interest Expense 38,400 570 510 Income before Income Tax Expense 6,230 17,290 Income Tax Expense 1,500 5,700 Net Income $ 4,730 $ 11,590 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 $54,900 in 2016 and $45,800 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 $54,700 in 2016 and $41,500 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? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Required 4 1-a. Compute the gross profit percentage for each year. (Round your answers to 1 decimal place) 1.b. 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? Gross Pro Percentage 2015 34 2016 119 1- 0 Likely to eam in 20177 More Gros Pro Les Grow Profit Required 2 ) w 1 OM Tof stockholders in Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Requirea 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 2016 relative to 2015 2 a Net Profit Margin 2015 2016 % 2 Controling operating expenses in 2016 vs 2015? Better Job Worse Job Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Recured 3 Required 4 3-a. Computer Tycoon reported average net fixed assets of $54,900 in 2016 and $45,800 in 2015. Compute the fixed asset 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 2016 or 2015 3 a Fixed Asset Turnover 2015 2016 3- Investment better utled? 2015 O2016 Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required* 4-a. Computer Tycoon reported average stockholders' equity of $54,700 in 2016 and $41,500 in 2015. The company has not Issued preferred stock. Compute the return on equity ratios for both years. (Round your answers to 1 decimal place.) 4-b. Did the company generate greater returns for stockholders in 2016 than in 2015? a. Return on Equity (ROE) 56 2015 2016 % 4 b. Greater returns generated in 2016? Ores ONO
