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	$	380,670	*		$	320,000
Cost of sales		320,270				268,000
Gross margin		60,400				52,000
Operating expenses and interest expense		41,030				36,600
Earnings before income taxes		19,370				15,400
Income tax expense		7,440				5,700
Net earnings	$	11,930			$	9,700
Statement of Financial Position
Cash	$	4,110			$	8,100
Accounts receivable (net)		15,130				18,000
Inventory		43,710				38,000
Property, plant, and equipment (net)		25,020				21,000
	$	87,970			$	85,100
Current liabilities (no interest)	$	14,530			$	17,600
Non-current liabilities (10% interest)		35,310				34,100
Common shares (6,000 shares)		18,000				18,000
Retained earnings		20,160				15,400
	$	88,000			$	85,100

*One-third was credit sales. During Year 2, cash dividends amounting to $7,200 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.)

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).)

2-b. Income tax rate. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).)

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).)

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).)

2-e. Debt-to-equity ratio. Interpret the result. (Round the final answer to 2 decimal places.)

2-f. Return on assets. Assume that long-term debt increased to $35,310 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).)

2-g. Return on equity. (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).)

2-h. Financial leverage percentage. Did borrowing from creditors benefit shareholders? (Round intermediate calculations and final answer to 2 decimal places.)