Refer to the condensed income statement for CarMax, Inc., in Exercise 21 and to the company’s balance sheet shown as follows.

TO DO: Compute the following profitability ratios for 2011, and provide a brief explanation after each ratio (round percentage computations to one decimal place and earnings per share to two decimal places):

1. Gross margin ratio
2. Profit margin ratio
    

Transcribed Image Text:

Carmax, Inc. Income Statement Years Ended February 28, 2011 and February 28, 2010 (in millions) 2011 $8,976 7,674 $1,302 905 $ 397 3 220 $ 614 233 $ 381 Net sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Interest expense Other income (expenses; net) Income before taxes Income tax expense Net income 2010 $7,470 6,371 $1,099 819 $ 280 3 176 $ 453 171 $ 282 Carmax, Inc. Income Statement Years Ended February 28, 2011 and February 28, 2010 (in millions) 2011 $8,976 7,674 $1,302 905 $ 397 3 220 $ 614 233 $ 381 Net sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Interest expense Other income (expenses; net) Income before taxes Income tax expense Net income 2010 $7,470 6,371 $1,099 819 $ 280 3 176 $ 453 171 $ 282

Answer rating: 100% (QA)

1 Gross Margin Ratio Gross Margin Net Sales 100 1302 8976 100 145 Gross Margin Ratio shows ear... View the full answer