P12-2 Analyzing Comparative Financial Statements by Using Percentages and Selected Ratios LO12-5, 12-6, 12-9 The comparative financial statements prepared at December 31, year 2, for Goldfish Company showed the following summarized data: Year 2 Year 1 Statement of Earnings Sales revenue Cost of sales Gross margin Operating expenses and interest expense Earnings before income taxes Income tax expense Net earnings Statement of Financial Position Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) $288,950* $245,000 233,680 197,000 55, 270 48,000 39,920 35,700 15,350 12,300 4,130 3,100 $ 11,220 $ 9,200 $ 4,780 19, 120 49,060 43, 150 $116,110 $ 15, 220 40,670 42,000 18, 220 $116, 110 $ 9,600 23,000 43,000 36,500 $112,100 $ 18,400 37,400 42,000 14,300 $112,100 Current liabilities (no interest) Non-current liabilities (10% interest) Common shares (6,000 shares) Retained earningst *One-third was credit sales. During Year 2, cash dividends amounting to $7,300 were declared and paid. Required: 1. Present component percentages for Year 2 only. (Input all amounts as positive values. Round the final answers to the nearest whole percent. Percentages may not add exactly due to rounding.) Component Percentages Year 2 Statement of earnings: Sales revenue 100% 81 % 19% Cost of sales Gross margin Operating expenses and interest expense Earnings before income taxes 14% 5% Income tax expense 1 % 4 % 4 % Net earnings Statement of financial position: Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) Total assets 16% 42% 37% 99 % 13% 35% Current liabilities Long-term liabilities Common shares Retained earnings Total liabilities and shareholders' equity 36% 16% 100% Compute the following for year 2: 2-a. Percentage markup on sales. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).) Average percentage 19.01% 2-b. Income tax rate. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).) Average income tax 27.01% 2-c. 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 0.05% Good 2-d. Percentage of total resources invested in property, plant, and equipment. (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Percentage % 2-e. Debt-to-equity ratio. Interpret the result. (Round the final answer to 2 decimal places.) Debt-to-equity ratio 2-f. Return on assets. Assume that long-term debt increased to $40,670 in month 1 of year 2. (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-f. Return on assets. Assume that long-term debt increased to $40,670 in month 1 of year 2. (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. 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. Financial leverage percentage. Did borrowing from creditors benefit shareholders? (Round intermediate calculations and final answer to 2 decimal places.) Financial leverage percentage %
