For the profitability analysis, compute McDonough Products' (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Products' profit performance better or worse than the average for the industry?
First column is the McDonough Products and the second is the Industry Average.
| Net sales............................................................................... |
$ 700,000 |
100.0% |
| Cost of goods sold.............................................................. |
490,000 |
57.3 |
| Gross profit.......................................................................... |
210,000 |
42.7 |
| Operating expenses ........................................................... |
175,000 |
29.4 |
| Operating income................................................................ |
35,000 |
13.3 |
| Other expenses.................................................................... |
7,000 |
2.5 |
| Net income .......................................................................... |
$ 28,000 |
10.8% |
| Current assets...................................................................... |
$ 471,200 |
72.1% |
| Fixed assets, net ................................................................. |
114,700 |
19.0 |
| Intangible assets, net .......................................................... |
21,080 |
4.8 |
| Other assets......................................................................... |
13,020 |
4.1 |
| Total ..................................................................................... |
620,000 |
100.0% |
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| Current liabilities ................................................................. |
240,560 |
0.5 |
| Long-term liabilities ............................................................ |
135,160 |
21.0 |
| Stockholders' equity............................................................ |
244,280 |
31.8 |
| Total ..................................................................................... |
$ 620,000 |
100.0% |
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| Industry Average Current Ratio |
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1.53 |
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| Industry Average Total Debt to Total Assets |
0.68 |
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