x Enterprises reports the following information on its year-end income st t Sales $190,000 Operating Expenses $20,000 st of Goods Sold 130,000 Other Income 10,000 quired culate Alex's gross profit percentage and return on sales ratio. und answer to one decimal place.) oss profit percentage = 96
x Enterprises reports the following information on its year-end income st t Sales $190,000 Operating Expenses $20,000 st of Goods Sold 130,000 Other Income 10,000 quired culate Alex's gross profit percentage and return on sales ratio. und answer to one decimal place.) oss profit percentage = 96
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
100%
calculate Alex‘s gross profit percentage and return on sales ratio. (Round answer to one decimal place)
![**Profitability Analysis**
Alex Enterprises reports the following information on its year-end income statement:
| Item | Amount |
|-----------------------------|-----------|
| **Net Sales** | $190,000 |
| **Cost of Goods Sold** | $130,000 |
| **Operating Expenses** | $20,000 |
| **Other Income** | $10,000 |
**Required**
Calculate Alex's gross profit percentage and return on sales ratio. (Round answers to one decimal place.)
| Item | Percentage |
|-----------------------------|------------|
| **Gross profit percentage =** | |
| **Return on sales ratio =** | |
### Explanation of Terms and Ratios:
- **Gross Profit Percentage**: This ratio measures how much out of every dollar of sales a company keeps in earnings. It is calculated as:
\[ \text{Gross Profit Percentage} = \left( \frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Net Sales}} \right) \times 100 \]
- **Return on Sales Ratio**: This ratio indicates how efficiently a company turns sales into profit, factoring in all expenses. It is calculated as:
\[ \text{Return on Sales Ratio} = \left( \frac{\text{Net Income}}{\text{Net Sales}} \right) \times 100 \]
where:
\[ \text{Net Income} = \text{Net Sales} - \text{Cost of Goods Sold} - \text{Operating Expenses} + \text{Other Income} \]
By using the provided figures, you can derive these key financial ratios to understand the profitability of Alex Enterprises.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c159a77-a081-489a-86be-9bc0254059b3%2Fde11d4f7-d146-4aed-8c27-fe4c7f45d251%2Fccd57t_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Profitability Analysis**
Alex Enterprises reports the following information on its year-end income statement:
| Item | Amount |
|-----------------------------|-----------|
| **Net Sales** | $190,000 |
| **Cost of Goods Sold** | $130,000 |
| **Operating Expenses** | $20,000 |
| **Other Income** | $10,000 |
**Required**
Calculate Alex's gross profit percentage and return on sales ratio. (Round answers to one decimal place.)
| Item | Percentage |
|-----------------------------|------------|
| **Gross profit percentage =** | |
| **Return on sales ratio =** | |
### Explanation of Terms and Ratios:
- **Gross Profit Percentage**: This ratio measures how much out of every dollar of sales a company keeps in earnings. It is calculated as:
\[ \text{Gross Profit Percentage} = \left( \frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Net Sales}} \right) \times 100 \]
- **Return on Sales Ratio**: This ratio indicates how efficiently a company turns sales into profit, factoring in all expenses. It is calculated as:
\[ \text{Return on Sales Ratio} = \left( \frac{\text{Net Income}}{\text{Net Sales}} \right) \times 100 \]
where:
\[ \text{Net Income} = \text{Net Sales} - \text{Cost of Goods Sold} - \text{Operating Expenses} + \text{Other Income} \]
By using the provided figures, you can derive these key financial ratios to understand the profitability of Alex Enterprises.
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