E13-3 Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses 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. 2016 2015 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 $100,000 60,000 40,000 36,000 500 3,500 1,000 $ 2,500 $120,000 71,500 48,500 37,000 475 11,025 5,000 $ 6,025 E13-6 Matching Each Ratio with Its Computational Formula Match each ratio or percentage with its formula by entering the appropriate letter for each num- bered item. Ratios or Percentages 1. Current ratio 2. Net profit margin 3. Inventory turnover ratio 4. Gross profit percentage 5. Fixed asset turnover 6. Return on equity Formula A. Net income - Total revenue B. (Net sales revenue Cost of goods sold) - Net sales revenue C. Current assets - Current liabilities D. Cost of goods sold - Average inventory E. Net credit sales revenue - Average net receivables F. (Net income - Preferred dividends) - Average number of common shares outstanding G. Total liabilities - Total assets H. (Net income + Interest expense + Income tax expense) - Interest expense I. Current market price per share - Earnings per J. (Net income - Preferred dividends) - Average com- mon stockholders' equity K. Total revenue - Average net fixed assets 7. Times interest earned 8. Debt-to-assets ratio 9. Price/earnings ratio 10. Receivables turnover ratio share 11. Earnings per share