P12-2 Analyzing Comparative Financial Statements by Using Percentages and Selected Ratios LO12-5, 12-6, 12-9 The comparative financial statements prepared at December 31, year 2, for Goldfish Company showed the following summarized data: Statement of Earnings Sales revenue Cost of sales Gross margin Operating expenses and interest expense Earnings before income taxes Income tax expense Net earnings Cash Statement of Financial Position Accounts receivable (net) Inventory Year 2 Year 1 $288,950* $245,000 233,680 197,000 55,270 48,000 39,920 35,700 15,350 12,300 4,130 3,100 $ 11,220 $ 9,200 $ 4,780 $ 9,600 19,120 23,000 49,060 43,000 43,150 $116,110 Property, plant, and equipment (net) Current liabilities (no interest) Non-current liabilities (10% interest) Common shares (6,000 shares) Retained earningst $ 15,220 40,670 36,500 $112,100 $ 18,400 37,400 42,000 42,000 18,220 14,300 $116,110 $112,100 *One-third was credit sales. During Year 2, cash dividends amounting to $7,300 were declared and paid. Required: 1. Present component percentages for Year 2 only. (Input all amounts as positive values. Round the final answers to the nearest whole percent. Percentages may not add exactly due to rounding.) Answer is complete but not entirely correct. Component Percentages Year 2 Statement of earnings: Sales revenue Cost of sales Gross margin Operating expenses and interest expense Earnings before income taxes 100 81 % do do % 19 % 14 % 5 % 27 % (22) % Income tax expense Net earnings Statement of financial position: Cash 4 % Accounts receivable (net) 16 % Inventory 42 % Property, plant, and equipment (net) 37 % Total assets 99 % Current liabilities 13 % Long-term liabilities 35 % Common shares 36 % Retained earnings 16 % Total liabilities and shareholders' equity 100 % Compute the following for year 2: 2-a. Percentage markup on sales. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).) Answer is complete and correct. Average percentage 19.1 % 2-b. Income tax rate. (Round percentage answer to 1 decimal place (i.e., 0.124 should be entered as 12.4).) Answer is complete and correct. Average income tax 26.9 % 2-c. Net profit margin ratio. Was it a good or poor indicator of performance? (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Answer is complete but not entirely correct. Net profit margin ratio 5.31 % Poor 2-d. Percentage of total resources invested in property, plant, and equipment. (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Percentage Answer is not complete. % 2-e. Debt-to-equity ratio. Interpret the result. (Round the final answer to 2 decimal places.) Answer is complete but not entirely correct. Debt-to-equity ratio 92.81 Bad 2-f. Return on assets. Assume that long-term debt increased to $40,670 in month 1 of year 2. (Round intermediate calculations to 3 decimal places and percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Return on assets % 2-g. Return on equity. (Round percentage answer to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Return on equity % 2-h. Financial leverage percentage. Did borrowing from creditors benefit shareholders? (Round intermediate calculations and final answer to 2 decimal places.) Financial leverage percentage %