The following are extracted from the financial statements of Shawn Co., for 2019, 2018, and2017.201920182017Net sales$233,000(124,000)(95,000)$204,000Cost of sales(110,000)(81,500)Selling and administrative expensesOther income:InterestOther(3,700)(3,050)1,175$ 10,625100Earnings before tax and extraordinary creditProvision for income tax$ 10,400(4,800)5,600(4,740)Earnings before extraordinary creditExtraordinary credit5,8851,510$ 7,395$ 5,600Total assets$202,000$173,00017,400116,8004,000280$161,000Long-term debtCommon equity24,600123,00015,200112,8004,000280Preferred stock4,000Preferred dividends280Required:Compute the following ratios for Shawn Co. for 2019 and 2018.1. Return on total equityReturn on common equityGross profit margin2.3.b. Discuss the trend in profitability and identify specific causes for the trend.

(a) S.No. Ratio Formula 2019 2018 1 Return on total equity Net income/Total equity *100…

The following are extracted from the financial statements of Shawn Co., for 2019, 2018, and 2017. 2019 $233,000 2018 2017 Net sales Cost of sales Selling and administrative expenses (124,000) (95,000) $204,000 (110,000) (81,500) Other income: Interest (3,700) 100 S 10,400 (4,800) 5,600 (3,050) 1,175 S 10,625 (4,740) 5,885 1,510 $ 7,395 Other Earnings before tax and extraordinary credit Provision for income tax Earnings before extraordinary credit Extraordinary credit $ 5,600 $161,000 15,200 112,800 Total assets $202,000 Long-term debt Common equity $173,000 17,400 116,800 24,600 Preferred stock Preferred dividends 123,000 4,000 280 4,000 280 4,000 280 Required: Compute the following ratios for Shawn Co. for 2019 and 2018. 1. Return on total equity 2. Return on common equity 3. Gross profit margin b. Discuss the trend in profitability and identify specific causes for the trend.

The following are extracted from the financial statements of Shawn Co., for 2019, 2018, and 2017. 2019 $233,000 2018 2017 Net sales Cost of sales Selling and administrative expenses (124,000) (95,000) $204,000 (110,000) (81,500) Other income: Interest (3,700) 100 S 10,400 (4,800) 5,600 (3,050) 1,175 S 10,625 (4,740) 5,885 1,510 $ 7,395 Other Earnings before tax and extraordinary credit Provision for income tax Earnings before extraordinary credit Extraordinary credit $ 5,600 $161,000 15,200 112,800 Total assets $202,000 Long-term debt Common equity $173,000 17,400 116,800 24,600 Preferred stock Preferred dividends 123,000 4,000 280 4,000 280 4,000 280 Required: Compute the following ratios for Shawn Co. for 2019 and 2018. 1. Return on total equity 2. Return on common equity 3. Gross profit margin b. Discuss the trend in profitability and identify specific causes for the trend.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 12P

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