P12-2 Analyzing Comparative Financial Statements by Using Percentages and Selected Ratios LO12-5, 12-6, 12-7, 12-8 The comparative financial statements prepared at December 31, 2017, for Goldfish Company showed the following summarized data: 2017 2016 Statement of Earnings Sales revenue Cost of sales $ 380,670* 320,270 $ 320,000 268,000 Gross margin Operating expenses and interest expense 60,400 41,030 52,000 36,600 Earnings before income taxes Income tax expense 19,370 7,440 15,400 5,700 Net earnings $ 11,930 $ 9,700 $ Statement of Financial Position Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) $ 4,110 15,130 43,710 25,020 8,100 18,000 38,000 21,000 $ 87,970 $ 85,100 Current liabilities (no interest) Non-current liabilities (10% interest) Common shares (6,000 shares) Retained earningst $ 14,530 35,310 18,000 20,160 $ 17,600 34,100 18,000 15,400 $ 88,000 $ 85,100 *One-third was credit sales. During 2017, cash dividends amounting to $7,200 were declared and paid. Answer the following for 2017: 2- What was the average percentage markup on sales? (Round percentage answer to 1 decimal place a. (i.e., 0.124 should be entered as 12.4).) Average percentage % 2- What was the average income tax rate? (Round percentage answer to 1 decimal place (i.e., 0.124 b. should be entered as 12.4).) Average income tax % 2-c. Compute the net profit margin ratio. Was it a good or poor indicator of performance? (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Net profit margin ratio 3.13% : Poor 2-d. What percentage of total resources was invested in property, plant, and equipment? (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Percentage 28.44% 2-e. Compute the debt-to-equity ratio. Does it look good or bad? (Round the final answer to 2 decimal places.) Debt-to-equity ratio 1.31 Bad 2-f. What was the return on assets? (Round intermediate calculations to 3 decimal places and percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Return on assets : % 2-g. What was the return on equity? (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Return on equity % 2-h. Compute the financial leverage percentage. Did borrowing from creditors benefit shareholders? (Round intermediate calculations and final answer to 2 decimal places.) Financial leverage percentage %
