FMGT 1116 Lecture Notes - Gross Margin
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Related Questions
CP3-2 | Finding Financial Information | LO3-2, 3-4, 3-6 | ||||
Refer to the financial statements of Urban Outfitters in Appendix C at the end of the book. | ||||||
Required: | ||||||
1. What is the company's revenue recognition policy? (Hint: Look in the notes to the financial statements.) | ||||||
Revenue is recognized at the point of sale or when merchandise is shipped to the customers for wholesale or direct to consumer sales. Revenue is recognized at the complation of a job or servic e for landscape sales. | ||||||
2. Assuming that $50 million of cost of sales was due to noninventory purchase expenses (distribution and occupancy costs), how | ||||||
much inventory did the company buy during the year? (Hint: Use a T-account of inventory to infer how much was purchased.) | ||||||
INVENTORY (in thousands) | ||||||
Inventory purchased during the year: | ||||||
3. Calculate selling, general, and administrative expenses as a percent of sales for each year presented. (Dollars in thousands.) | ||||||
Year Ended | SG&A Expenses / | Net Sales Revenue | = Percentage | |||
2012 | ||||||
2011 | ||||||
2010 | ||||||
By what percent did these expenses increase or decrease from fiscal years ended 2011 and 2012 and between 2010 and 2011? | ||||||
(Hint: Percentage Change = [Current Year Amount â Prior Year Amount]/Prior Year Amount.) | ||||||
% Change | Incr. or Decr. | |||||
Between years ended 2011 and 2012: | ||||||
Between years ended 2010 and 2011: | ||||||
4. Compute the company's net profit margin for each year presented. (Dollars in thousands.) | ||||||
Fiscal Year Ended | Net Income / | Net Sales (or Operating) Revenues | = Net Profit Margin Ratio | |||
2012 | ||||||
2011 | ||||||
2010 | ||||||
Explain net profit margin ratio and discuss the results shown above. | ||||||
Use the financial statements for Fox Manufacturing Company for the year ended Decemberâ 31, 2015, along with the industry average ratios âto: | |
for the Year Ended December 31, 2015 | |
Sales revenue | $602,000 |
Less: Cost of goods sold | 460000 |
Gross profits | $142,000 |
Less: Operating expenses | |
General and administrative expenses | $29,600 |
Depreciation expense | 30500 |
Total operating expense | 60100 |
Operating profits | $81,900 |
Less: Interest expense | 10300 |
Net profits before taxes | $71,600 |
Less: Taxes | 27500 |
Net profits after taxes (earnings available for common stockholders) | $44,100 |
Earnings per share (EPS) | $2.17 |
Use the financial statements for Fox Manufacturing Company for the year ended Decemberâ 31, 2015, along with the industry average ratios âto:
Industry average, 2015 | |
Current ratio | 2.4 |
Quick ratio | 0.91 |
Inventory turnover* | 4.46 times |
Average collection period* | 35.7 days |
Total asset turnover | 1 |
Debt ratio | 0.22 |
Times interest earned | 12.3 |
Gross profit margin | 0.204 |
Operating profit margin | 0.138 |
Net profit margin | 0.101 |
Return on total assets (ROA) | 0.092 |
Return on common equity (ROE) | 0.169 |
Earnings per share (EPS) | $3.16 |
*Based on a 365-day year and on end-of-year figures. a. Prepare and interpret a complete ratio analysis of theâ firm's 2015 operations. b. Summarize your findings and make recommendations. |