Question

Calculate the following for each of the years listed

A. Debt/ Equity ratio

B. Debt/asset ratio

C.Profit Margin (as a %)

D. Gross Margin (as a %)

E. Calculate the change in profit margin over each year

Exhibit 1: Iggy’s Financial Statements, 1994-1999

	1994	1995	1996	1997	1998	1999
Income Statement Data
Net revenue	1,000,000	2,500,000	3,000,000	4,000,000	4,500,000	6,000,000
Cost of goods sold Labor Other	570,000 220,000 350,000	1,700,000 900,000 800,000	1,920,000 1,080,000 840,000	2,520,000 1,480,000 1,040,000	3,195,000 1,890,000 1,305,000	4,000,000 2,340,000 1,740,000
Gross margin	430,000	800,000	1,080,000	1,480,000	1,305,000	2,000,000
Profit after taxes (PAT)	190,000	375,000	480,000	150,000	25,000	140,000
Balance Sheet Data
Current Assets	N/A	200,000	250,000	500,000	500,000	700,000
Net PP&E	N/A	350,000	300,000	300,000	3,000,000	3,000,000
Total Assets	N/A	550,000	500,000	850,000	3,000,000	3,700,000
Long term debt	0	10,000	15,000	20,000	1,500,000	2,000,000

Answer 1

As per rules I am answering the first 4 subparts of the question

	1994	1995	1996	1997	1998	1999
A. Debt/ Equity ratio	NA	0.0185	0.0309	0.0241	1.0000	1.1765
B. Debt/asset ratio	NA	0.0182	0.0300	0.0235	0.5000	0.5405
C.Profit Margin (as a %)	19.00%	15.00%	16.00%	3.75%	0.56%	2.33%
D. Gross Margin (as a %)	43.00%	32.00%	36.00%	37.00%	29.00%	33.33%

WORKINGS