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12 October, 05:35

Use the following selected data from Business Solutions's income statement for the three months ended March 31, 2016, and from its March 31, 2016, balance sheet to complete the requirements below: computer services revenue, $25,307; net sales (of goods), $18,693; total sales and revenue, $44,000; cost of goods sold, $14,052; net income, $18,833; quick assets, $90,924; current assets, $95,568; total assets, $120,268; current liabilities, $875; total liabilities, $875; and total equity, $119,393.

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?

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Answers (1)
  1. 12 October, 05:43
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    A)

    • Gross Profit Margin (with services revenue) = 0.681

    • Gross Profit Margin (without services revenue) = 0.248

    • Net profit margin (with services revenue) = 0.428

    • Net profit margin (without services revenue) = 1.007

    B)

    • Current Ratio = 109.220

    • Acid-Test Ratio = 103.913

    C)

    • Debt ratio = 0.007

    • Equity Ratio = 0.993

    D)

    • Current Asset Percent = 79.46%

    • Long-Term Asset Percent = 20.54%

    Explanation:

    Gross Profit Margin = Net Sales - COGS / Net Sales

    • Gross Profit Margin (with services revenue) = (44,000 - 14,052) / 44,000 = 0.681

    • Gross Profit Margin (without services revenue) = (18,693 - 14,052) / 18,693 = 0.248

    Net profit margin = Net income / Revenues

    • Net profit margin (with services revenue) = 18,833 / 44,000 = 0.428

    • Net profit margin (without services revenue) = 18,833 / 18,693 = 1.007

    Current Ratio = Current Asset / Current Liabilities = 95,568 / 875 = 109.220

    Acid-Test Ratio = (Current Asset - Inventory) / Current Liabilities = 90,924 / 875 = 103.913

    Debt ratio = Total debt / Total Assets = 857 / 120,268 = 0.007

    Equity Ratio = Total Shareholder Equity / Total Assets = 119,393 / 120,268 = 0.993

    Current Asset Percent = (Current Asset / Total Asset) * 100 = (95,568/120,268) * 100 = 79.46%

    Long-Term Asset Percent = (Long-Term Asset / Total Asset) * 100 = ((120,268-95,568) / 120,268) * 100 = 20.54%
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