Questions and Problems on Company's Gross Profit

2. What was the amount of cost of goods sold for the year?

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At year-end of 2015, GE Sales Revenue is $85,298,000.

Now, here is where the interpretation went the wrong way. General Electric Company is a service industry. You were supposed to choose another company. Probably Nike, Apple, or Walmart. Those companies deal with products, and their financial statements have the cost of goods sold value.

3. Income statement format in use. Explain.

GE is using a Multi-Step Income Statement format. This form represents revenues and expenses with subtotals to highlight significant relationship. This arrangement will help relate to marketing and selling of GEs goods and services.

Here, you are right. The company uses Mult-step income statement. The format groups similar items together and offers gross values summations.

4. Compute the business's gross profit percentage for the year-end.

The gross profit percentage measures the profitability of each sales dollar above the cost of goods sold. A high gross profit percentage is desired.

Gross profit percentage = Gross profit / Net sales revenue

27% = .27 = 32,088,000 / 117,386,000

Your calculation is right here. The gross profit is 27%.

5. Did the gross profit percentage improve, worsen, or hold steady?

Gross profit for 2014 is 26% therefore 2015 have an improvement from last year.

Yes, there is an increase of 1% in profits. You are certainly correct.

6. How does the company's gross profit percentage compare to the industry?

GE was compared to it competition within the industry and GE gross profit percentage is on the bottom of GE several competitor companies.

On this part, you are supposed to use actual figures. Specifically, you are supposed to quote profitability positions of competitors. Here, the question expects you to use actual comparison with companies like 3M Co, Siemens AG, Honeywell International, ABB Ltd, and Fanuc Inc.

7. What are the company's inventory turnover and days sales in inventory for the year-end?

GE had an inventory turnover equal 2 and GE days inventory is 183 days.

Here, you are supposed to show calculations. That is, for inventory turnover, you take the cost of goods sold divided by average inventory. Unfortunately, GE is a service provision company and therefore such ratio will not be realized.

8. Is there anything interesting to note about these ratios?

Maybe this is why the GE stock values are low because the inventory turnover is only 2. The higher the inventory turnover ratio, the better it is for the company as it indicates a greater generation of sales. The inventory ratio and days sales of inventory help inform the investment decision whether a company can effectively manage its inventory when compared to competitors.Here, this is a yes or no question with a simple explanation required for each assertion. Additionally, the facts here must be compared.

For example, if you say turnover ratio is two, you should explain how this is interesting.