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) $379,798* $320,000 321,700 270,000 58, ege 50,000 39,220 35,000 18,870 15,600 6,690 5, 100 $ 12,180 $ 9,900 $ 4,170 15,990 46, e5e 27,430 $ 93,640 $ 15,350 36,810 24, eee 17,482 $ 93,640 $ 8, 200 19,600 40,000 23,000 $ 90,200 $ 18,500 35,900 24,000 11,800 $ 90,200 Current liabilities (no interest) Non-current liabilities (10% interest) Common shares (6,eee shares) Retained earningst *One-third was credit sales. During Year 2, cash dividends amounting to $6,500 were declared and pald. 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.) 2 Answer is complete and correct. Component Percentages Year 2 Statement of earnings: Sales revenue 100 % Cost of sales 85 % Gross margin 15 % Operating expenses and interest expense 10 Earings before income taxes 5 % Income tax expense % Net earnings 3 % Statement of financial position: Cash 5 % Accounts receivable (net) 17 % Inventory 49 Property, plant, and equipment (net) 29 Total assets 100 % Current liabilities 16 % Long-term liabilities 39 % Common shares 26 Retained earnings 19 % Total liabilities and shareholders' equity 100 % >> Compute the following for year 2: 2-a. Percentage markup on sales. (Round percentage answer to 1 decimal place (1.e., 0.124 should be entered as 12.4).) Answer is complete and correct. Average percentage 15.3 % 2-b. Income tax rate. (Round percentage answer to 1 decimal place (I.e., 0.124 should be entered as 12.4).) Answer is complete and correct. Average income tax 35.5 % 2-c. Net profit margin ratio. Was it a good or poor Indicator of performance? (Round percentage answer to 2 decimal places (.e., 0.1243 should be entered as 12.43).) Answer is complete and correct. Net profit margin ratio 3.21 % Poor 2-d. Percentage of total resources Invested in property, plant, and equipment. (Round percentage answer to 2 decimal places (l.e., 0.1243 should be entered as 12.43).) Answer is complete and correct. Percentage 29.29 % 2-e. Debt-to-equity ratio. Interpret the result. (Round the final answer to 2 decimal places.) Answer is complete and correct. Debt-to-equity ratio 1.26 Bad 2-f. Return on assets. Assume that long-term debt Increased to $36,810 In month 1 of year 2. (Round Intermediate calculations to 3 decimal places and percentage answer to 2 decimal places (1.e., 0.1243 should be entered as 12.43).) Answer is not complete. Return on assets % 2-9. Return on equity. (Round percentage answer to 2 decimal places (I.e., 0.1243 should be entered as 12.43).) Answer is not complete. Return on equity % 2-h. Financial leverage percentage. Did borrowing from creditors benefit shareholders? (Round Intermediate calculations and final answer to 2 decimal places.) * Answer is not complete. Financial leverage percentage % Yes
