E13-2 Computing and Interpreting Profitability Ratios [LO 13-4, LO 13-5) The average price of a gallon of gas in 2015 dropped $0.94 (28 percent) from $3.34 in 2014 (to $2.40 in 2015). Let's see whether these changes are reflected in the income statement of Insignia Corporation for the year ended December 31, 2015 (amounts in billions). 2015 $285 120 59 106 21 85 $301 Revenues Cost of Purchased Crude oil and Products Other Operating Costs Income before Income Tax Expense Income Tax Expense Net Income 122 28 $ 94 Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2014 to 2015 is the beginning of a sustained 2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Insignia did a 3. Insignia reported average net fixed assets of $230 billion in 2015 and $162 billion in 2014. Compute the fixed asset turnover ratios 4. Insignia reported average stockholders' equity of $220 billion in 2015 and $162 billion in 2014. The company has not issued trend, is Insignia likely to earn more or less gross profit from each dollar of sales in 2016? better or worse job of controlling expenses other than the costs of crude oil and products in 2015 relative to 2014 for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2015 or 2014? preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2015 or 2014? Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 Required 4 1-a. Compute the gross profit percentage for each year. (Round your answers to 1 decimal place.) 1-b. Assuming that the change from 2014 to 2015 is the beginning of a sustained trend, is Insignia likely to earn more or less gross profit from each dollar of sales in 2016? Gross Profit Percentage 1-a. 2014 2015 1-b. Likely to earn in 2016? O More Gross Profit OLess Gross Profit Required 1Required 2Required 3Required 4 2-a. Compute the net profit margin for each year. (Round your answers to 1 decimal place.) 2-b. Did Insignia do a better or worse job of controlling expenses other than the costs of crude oil and products in 2015 relative to 2014 2-a Net Profit Margin 2014 2015 2-b. Controlling expenses in 2015 vs 2014? OBetter Job Worse Job Required 1 Required 2 Required 3 Required 4 3-a. Insignia reported average net fixed assets of $230 billion in 2015 and $162 billion in 2014. Compute the fixed asset turnover ratios for both years. (Round your answers to 2 decimal places.) 3-b. Did the company better utilize its investment in fixed assets to generate revenues in 2015 or 2014? 3-a Fixed Asset Turnover 2014 2015 3-b. Investment better utilized in 2015 or 2014 O2015 02014 |Required 4 Required 1 Required 2 Required 3 4-a. Insignia reported average stockholders' equity of $220 billion in 2015 and $162 billion in 2014. The company has not issued preferred stock. Compute the return on equity ratios for both years. (Round your answers to 1 decimal place.) 4-b. Did the company generate greater returns for stockholders in 2015 or 2014? 4-a. Return on Equity (ROE) 2014 2015 4-b. Greater returns generated in 2014 or 2015? O2015 2014