Question

In early 2017, you established a company that manufactures and sells cosmetics of a quality that is competitive with products from Japan. After a year of operation, the following data are obtained:

Net sales: $ 120,000,000

Cost of production: $ 40,000,000

Marketing, general and administrative costs: $ 20,000,000

Interest fee: $ 5,000,000

Tax fee: $ 15,000,000

Total assets: $ 100,000,000

A. Give an assessment of your financial condition.
B. Determine the gross profit and net profit.
C. Calculate gross profit margin and net profit margin.
D. Calculate ROA.
F. Calculate asset intensity or asset turnover ratios.
G. Apply model ROA.
H. Interpret the results of the financial ratios that you get.

Answer 1

PROFIT AND LOSS ACCOUNT

To cost of production	$ 40,000,000	By Net sales	$ 120,000,000
To Gross profit	$80,000,000
	$ 120,000,000		$ 120,000,000
To Marketing, general and administrative costs	$ 20,000,000	By Net profit	$80,000,000
To Intrest fee	$ 5,000,000
To Tax fee	$ 15,000,000
To NET PROFIT	$40,000,000
	$80,000,000		$80,000,000

A. Give an assessment of your financial condition.

The financial condition of the comapany is good.. GP RATIO is high .. net profit ratio is good and can be improved using proper tax planning

B. GROSS PROFIT = $80,000,000

NET PROFIT =$80,000,000

C.

GROSS PROFIT MARGIN = GROSS PROFIT / SALES * 100 = .$80,000,000/ $ 120,000,000 *100 = 66.67%

NET PROFIT MARGIN = NET PROFIT / SALES * 100 = $40,000,000 / $ 120,000,000 * 100 = 33.33 %

D

ROA = RETURN ON ASSETS = NET SALES / TOTAL ASSETS = $ 120,000,000 / $ 100,000,000 = 1.2

Assumption :  Marketing, general and administrative costs are considered as indirect costs