Here is the question Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team’s effectiveness at managing its assets efficiently. At the start of 2019 (its fourth year), Massa's T-account balances were as follows. Dollars are in thousands. Transactions for 2019: Provided $59,700 in services to clients who paid $48,800 in cash and owed the rest on account. Received $5,800 cash from clients on account. Received $520 in cash as interest revenue on investments. Paid $36,000 in wages, $12,900 in travel, $6,800 in rent, and $1,300 on accounts payable. Received $1,200 in cash from clients in advance of services Massa will provide next year. Received a utility bill for $690 for 2019 services. Declared and immediately paid $370 in dividends to stockholders. The T-account balances were as follows. (see attached 1) Here is the question: Calculate the net profit margin ratio for 2019. Based on the info above, I have gotten the below answer: Revenues 60220 - Expenses 56390 = Net income of 3830. This was shown to be correct. I then apply the calculation to ge the net profit margin (3830/60220) =6.36% but I was told it's incorrect and I dont know why. Thank you.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Here is the question
Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team’s effectiveness at managing its assets efficiently. At the start of 2019 (its fourth year), Massa's T-account balances were as follows. Dollars are in thousands.
Transactions for 2019:
- Provided $59,700 in services to clients who paid $48,800 in cash and owed the rest on account.
- Received $5,800 cash from clients on account.
- Received $520 in cash as interest revenue on investments.
- Paid $36,000 in wages, $12,900 in travel, $6,800 in rent, and $1,300 on accounts payable.
- Received $1,200 in cash from clients in advance of services Massa will provide next year.
- Received a utility bill for $690 for 2019 services.
- Declared and immediately paid $370 in dividends to stockholders.
- The T-account balances were as follows. (see attached 1)
Here is the question: Calculate the net profit margin ratio for 2019.
Based on the info above, I have gotten the below answer:
Revenues 60220 - Expenses 56390 = Net income of 3830. This was shown to be correct.
I then apply the calculation to ge the net profit margin (3830/60220) =6.36% but I was told it's incorrect and I dont know why.
Thank you.
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