Chapter 11
Financial Statement Analysis
571
Application Questions Group B
AP-1B (
4
)
Gross profit increased from $0.3 million in 2015, to $0.4 million in 2016. Gross profit margin
decreased from 30% in 2015, to 28% in 2016. Comment on whether or not the company’s
profitability improved or deteriorated.
AP-2B (
4
5
)
Sou Heng Company reported the following financial information at the end of 2016.
Sales
$2,110,000
Cost of Goods Sold
$740,000
Operating Expenses
$394,000
Interest Expense included in Operating Expenses
$53,000
Income Taxes
38% of income
Shareholders’ Equity (Average)
$18,000,000
Required
a) Calculate EBIT.
b) Calculate the net profit margin.
