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A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto: Mckenzie Sales, Ltd. Comparative Income Statement This Year Last Year Sales $7,400,000 $5,624,000 Cost of goods sold 4,590,000 3,511,000 Gross margin 2,810,000 2,113,000 Selling and administrative expenses: Selling expenses 1,378,000 1,077,000 Administrative 704,500 610,000 expenses Total expenses 2,082,500 1,687,000 Net operating income 727,500 426,000 Interest expense 100,000 93,000 Net income before $ 627,500 $ 333,000 taxes Members of the company's board of directors are surprised to see that net income increased by only $294,500 when sales increased by $1,776,000. Required: 1. Express each year's income statement in common-size percentages. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) This Year % % 0.0 % Last Year % % 0.0 % Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes % % % % 0.0 % 0.0% 0.0 % % 0.0 % 0.0 % % 0.0 % Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company's current assets, current liabilities, and sales over the last five years (Year 5 is the most recent year) are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Sales $4,686,650 $ 4,754,390 $5,103,740 $5,414,020 $5,795,780 Cash $ 89,897 $ 96,376 $ 97,681 $ 89,354 $ 79,475 Accounts receivable, 419,537 430, 255 443,882 508,620 568,138 net Inventory 802,729 867,582 818, 444 894,051 898,184 Total current $1,312,163 $1,394,213 $1,360,007 $1,492,025 $1,545, 797 assets Current $ 316, 453 $ 346, 788 $ 337, 199 $ liabilities 325, 343 404,035 Required: 1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) Year 1 % Year 2 % Year 3 % Year 4 % Year 5 % % % % % % Sales Current assets: Cash Accounts receivable, net Inventory Total current assets Current liabilities % % % % % % % % % % % % % % % % % % % % Selected financial data from the June 30 year-end statements of Safford Company are given below: $5,700,000 $ 690,000 Total assets Long-term debt (10% interest rate) Total stockholders' equity Interest paid on long- term debt Net income $3,000,000 $ 69,000 $ 380,000 Total assets at the beginning of the year were $5,500,000; total stockholders' equity was $2,800,000. The company's tax rate is 30%. Required: 1. Compute the return on total assets. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 2. Compute the return on equity. (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) 3. Is financial leverage positive or negative? % Return on total 1. assets 2. Return on equity 3. Financial Leverage % Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 2 on June 30 of the current year. On that date, the company's assets were: Cash Accounts receivable, net Inventory Prepaid expenses Plant and equipment, net Total assets $ 69,000 420,000 710,000 12,000 1,870,000 $3,081,000 Required: 1. What was the company's working capital on June 30? 2. What was the company's acid-test ratio on June 30? (Round your answer to 2 decimal places.) 3. The company paid an account payable of $48,000 immediately after June 30. a. What effect did this transaction have on working capital? b. What effect did this transaction have on the current ratio? (Round your intermediate calculations to 1 decimal place.) 1. Working capital 2. Acid-test ratio 3a. Effect on working capital 3b. Effect on current ratio
