Question

You are given the following information for Smashville, Inc.

Cost of goods sold:	$	170,000
Investment income:	$	3,200
Net sales:	$	308,000
Operating expense:	$	49,000
Interest expense:	$	7,400
Dividends:	$	14,000
Tax rate:		40	%

Current liabilities:	$	24,000
Cash:	$	21,000
Long-term debt:	$	6,000
Other assets:	$	40,000
Fixed assets:	$	162,000
Other liabilities:	$	5,000
Investments:	$	16,000
Operating assets:	$	51,000

  

Calculate the gross margin, the operating margin, return on assets, and return on equity. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Answer 1

Answer:

Gross Margin = Gross Margin / Net Sales * 100
Gross Margin = $138,000 / $308,000 * 100
Gross Margin = 44.81%

Operating Margin = Operating Income / Net Sales * 100
Operating Margin = $89,000 / $308,000 * 100
Operating Margin = 28.90%

Return on Assets = Net Income / Total Assets * 100
Return on Assets = $50,880 / $239,000 * 100
Return on Assets = 21.29%

Return on Equity = Net Income / Total Stockholders’ Equity * 100
Return on Equity = $50,880 / $204,000 * 100
Return on Equity = 24.94%