Question

Use the following selected data from Business Solutions’s income statement for the three months ended March 31, 2018, and from its March 31, 2018, balance sheet to complete the requirements below: computer services revenue, $29,277; net sales (of goods), $18,666; total sales and revenue, $47,943; cost of goods sold, $14,366; net income, $20,739; quick assets, $88,424; current assets, $95,344; total assets, $121,624; current liabilities, $870; total liabilities, $870; and total equity, $120,754.

Required: A: Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio. B: Compute the current ratio and acid-test ratio. C: Compute the debt ratio and equity ratio. D: What percent of its assets are current? What percent are long term?

Note: Please solve the problem completely with details that I can practice and learn. Thank you.

Answer 1

1.

Gross margin ratio (with service revenue) = gross margin / total sales and revenue  

= (47,943 - 14,366 )/47,943

= 33577 /47943

= 0.7003

= 70.03%

Note :
Gross margin = Total sales and revenue - Cost of goods sold.

Gross margin ration (without service revenue) = (Net sales - Cost of goods sold) / Net sales

= (18,666 - 14,366 ) / 18,666

= 4300 / 18666

= 0.2303

= 23.03%

Net profit margin ratio = Net margin / Total sales and service revenue

= 20,739 / 47,943

= 0.4325

= 43.25%

Note :

Net margin = Net income

2.

Current ratio = current asset /current liabilities

= 95,344 / 870

= 109.59 : 1

Quick ratio (acid test ratio) = quick asset / current liabilities

= 88,424 / 870

= 101.63 : 1

3.

Debt ratio = total liabilities / total asset

= 875 / 121,624

= 0.0071 : 1

Equity ratio = Total shareholders equity / total asset

= 120,754 / 121,624

= 0.9928 : 1

4.

Percentage of current asset = current asset / total asset

= 95,344 / 121,624

= 0.7839

= 78.39%

Percentage of long term asset = 100 - 78.39

= 21.61%

Note :

All the remaining assets are long term assets.