Elite Fence is the larger company based on sales and total assets, so you perform the following steps to compare and analyze the companies. The Elite Fence Company and Strong Wall Corporation are competitors in manufacturing walls and fences. You are interested in comparing the two firms' profitability. Their income statements and other information are presented below. (Click the icon to view the comparative income statements.) Read the requirements. (amounts in millions) Company Corporation Company Corporation Sales $ 100% 100% 980,000 $ 687,960 69,000 42,504 53.6 Cost of goods sold % 48 % Gross profit 292,040 26,496 46.4% 52% Selling, general, and administrative expenses 56,840 2,346 25.6 % 25.2% Other operating expenses 690 11.1 % 13.4% 29,400 35,280 276 0.2 0.3 Interest expense % % Earnings before provision for taxes 23,184 9.5% 13.1 % 170,520 72,520 Provision for taxes 6,762 5.6 5.8 % % $ 98,000 $ 16,422 3.9 7.3 Net income % % Elite Fence's cost of goods sold, selling, general & administrative expenses, other operating expenses, and interest expense are all a higher proportion of sales than the same ratios for Strong Wall Corporation. Strong Wall's net income is a higher proportion of sales than Elite Fence Company. Requirement b. Compute profit margin, return on assets, and return on stockholders' equity. Which company appears more profitable? Select the formula and then enter the amounts to calculate the profit margin for Elite Fence Company and Strong Wall Corporation. (Round your answers to the nearest tenth of a percent, X.X%.) Profit margin % % rn on assets for Elite Fence Company and Strong Wall Corporation. (Round your answers to the Elite Fence Company Strong Wall Corporation Average stockholders' equity Average total assets Select the formula and then ente Cost of goods sold nearest tenth of a percent, X.X% Interest expense Net income Elite Fence Company Sales revenue Strong Wall Corporation Return on assets % % Select the formula and then enter the amounts to calculate the return on stockholders' equity for Elite Fence Company and Strong Wall Corporation. (Round your answers to the nearest tenth of a percent, X.X%.) Return on / stockholders' equity % Elite Fence Company Strong Wall Corporation % Which company appears more profitable? profit margin is higher, indicating it is able to return more of each dollar of sales made to the shareholders or reinvest in the company. return on assets is higher, indicating it is using its resources more efficiently. return on stockholders' equity is higher implying it is using its financing structure to provide a greater return. Overall, both companies appear profitable, with performing profitability measures. Elite Fence Strong Wall (amounts in millions) Company Corporation Sales $ 980,000 $ 687,960 69,000 42,504 Cost of goods sold Gross profit 292,040 26,496 Selling, general, and administrative expenses 56,840 2,346 Other operating expenses 690 29,400 35,280 276 Interest expense Earnings before provision for taxes 170,520 72,520 23,184 6,762 Provision for taxes $ 98,000 $ 16,422 Net income $ 859,649 $ 117,300 Average Total Assets $ 480,392 $ 92,258 Average Stockholders' Equity
