Exercise 12-81Profitability RatiosFinancial statements for Steele Inc. follow.SteeleInc.ConsolidatedIncome Statements(in...Exercise 12-81Profitability RatiosFinancial statements for Steele...

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Accounting

Exercise 12-81
Profitability Ratios
Financial statements for Steele Inc. follow.
SteeleInc.
ConsolidatedIncome Statements
(inthousands except per share amounts)
2019 2018 2017
Net sales $7,245,088 $6,944,296 $6,149,218
Cost of goods sold (5,286,253) (4,953,556) (4,355,675)
Gross margin $1,958,835 $1,990,740 $1,793,543
General andadministrative expenses (1,259,896) (1,202,042) (1,080,843)
Special andnonrecurring items 2,617 0 0
Operating income $701,556 $788,698 $712,700
Interest expense (63,685) (62,398) (63,927)
Other income 7,308 10,080 11,529
Gain on sale ofinvestments 0 9,117 0
Income before incometaxes $645,179 $745,497 $660,302
Provision for incometaxes (254,000) (290,000) (257,000)
Net income $391,179 $455,497 $403,302
SteeleInc.
ConsolidatedBalance Sheets
(inthousands)
ASSETS Dec. 31,2019 Dec. 31,2018
Current assets:
Cash andequivalents $320,558 $41,235
Accountsreceivable 1,056,911 837,377
Inventories 733,700 803,707
Other 109,456 101,811
Total currentassets $2,220,625 $1,784,130
Property and equipment,net 1,666,588 1,813,948
Other assets 247,892 248,372
Total assets $4,135,105 $3,846,450
LIABILITIESAND STOCKHOLDERS’ EQUITY
Currentliabilities:
Accounts payable $250,363 $309,092
Accrued expenses 347,892 274,220
Other currentliabilities 15,700 0
Income taxes 93,489 137,466
Total currentliabilities $707,444 $720,778
Long-term debt 650,000 541,639
Deferred incometaxes 275,101 274,844
Other long-termliabilities 61,267 41,572
Total liabilities 1,693,812 1,578,833
Stockholders’equity:
Preferred stock $100,000 $100,000
Common stock 89,727 89,727
Additional paid-incapital—common stock 128,906 127,776
Retained earnings 2,397,112 2,136,794
$2,715,745 $2,454,297
Less: Treasury stock,at cost (274,452) (186,680)
Total stockholders’equity $2,441,293 $2,267,617
Total liabilities andstockholders’ equity $4,135,105 $3,846,450
Use the information provided above and below to respond to thefollowing requirements.
StatementItem January 1,2018 (in thousands)
Total assets $3,485,233
Total stockholders’ equity 2,083,122
Required:
Compute the five profitability ratios for 2018 and 2019. Roundintermediate calculations and final answers to two decimalplaces.
2019 2018
Gross profit percentage % %
Operating margin percentage % %
Net profit margin percentage % %
Return on assets % %
Return on equity % %

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In: AccountingExercise 12-81Profitability RatiosFinancial statements for Steele Inc. follow.SteeleInc.ConsolidatedIncome Statements(in...Exercise 12-81Profitability RatiosFinancial statements for Steele Inc. follow.SteeleInc.ConsolidatedIncome Statements(inthousands except per share amounts)201920182017Net sales$7,245,088$6,944,296$6,149,218Cost of goods sold(5,286,253)(4,953,556)(4,355,675)Gross margin$1,958,835$1,990,740$1,793,543General andadministrative expenses(1,259,896)(1,202,042)(1,080,843)Special andnonrecurring items2,61700Operating income$701,556$788,698$712,700Interest expense(63,685)(62,398)(63,927)Other income7,30810,08011,529Gain on sale ofinvestments09,1170Income before incometaxes$645,179$745,497$660,302Provision for incometaxes(254,000)(290,000)(257,000)Net income$391,179$455,497$403,302SteeleInc.ConsolidatedBalance Sheets(inthousands)ASSETSDec. 31,2019Dec. 31,2018Current assets:Cash andequivalents$320,558$41,235Accountsreceivable1,056,911837,377Inventories733,700803,707Other109,456101,811Total currentassets$2,220,625$1,784,130Property and equipment,net1,666,5881,813,948Other assets247,892248,372Total assets$4,135,105$3,846,450LIABILITIESAND STOCKHOLDERS’ EQUITYCurrentliabilities:Accounts payable$250,363$309,092Accrued expenses347,892274,220Other currentliabilities15,7000Income taxes93,489137,466Total currentliabilities$707,444$720,778Long-term debt650,000541,639Deferred incometaxes275,101274,844Other long-termliabilities61,26741,572Total liabilities1,693,8121,578,833Stockholders’equity:Preferred stock$100,000$100,000Common stock89,72789,727Additional paid-incapital—common stock128,906127,776Retained earnings2,397,1122,136,794$2,715,745$2,454,297Less: Treasury stock,at cost(274,452)(186,680)Total stockholders’equity$2,441,293$2,267,617Total liabilities andstockholders’ equity$4,135,105$3,846,450Use the information provided above and below to respond to thefollowing requirements.StatementItemJanuary 1,2018 (in thousands)Total assets$3,485,233Total stockholders’ equity2,083,122Required:Compute the five profitability ratios for 2018 and 2019. Roundintermediate calculations and final answers to two decimalplaces.20192018Gross profit percentage%%Operating margin percentage%%Net profit margin percentage%%Return on assets%%Return on equity%%

SteeleInc.
ConsolidatedIncome Statements
(inthousands except per share amounts)
	2019	2018	2017
Net sales	$7,245,088	$6,944,296	$6,149,218
Cost of goods sold	(5,286,253)	(4,953,556)	(4,355,675)
Gross margin	$1,958,835	$1,990,740	$1,793,543
General andadministrative expenses	(1,259,896)	(1,202,042)	(1,080,843)
Special andnonrecurring items	2,617	0	0
Operating income	$701,556	$788,698	$712,700
Interest expense	(63,685)	(62,398)	(63,927)
Other income	7,308	10,080	11,529
Gain on sale ofinvestments	0	9,117	0
Income before incometaxes	$645,179	$745,497	$660,302
Provision for incometaxes	(254,000)	(290,000)	(257,000)
Net income	$391,179	$455,497	$403,302

SteeleInc.
ConsolidatedBalance Sheets
(inthousands)
ASSETS	Dec. 31,2019	Dec. 31,2018
Current assets:
Cash andequivalents	$320,558	$41,235
Accountsreceivable	1,056,911	837,377
Inventories	733,700	803,707
Other	109,456	101,811
Total currentassets	$2,220,625	$1,784,130
Property and equipment,net	1,666,588	1,813,948
Other assets	247,892	248,372
Total assets	$4,135,105	$3,846,450
LIABILITIESAND STOCKHOLDERS’ EQUITY
Currentliabilities:
Accounts payable	$250,363	$309,092
Accrued expenses	347,892	274,220
Other currentliabilities	15,700	0
Income taxes	93,489	137,466
Total currentliabilities	$707,444	$720,778
Long-term debt	650,000	541,639
Deferred incometaxes	275,101	274,844
Other long-termliabilities	61,267	41,572
Total liabilities	1,693,812	1,578,833
Stockholders’equity:
Preferred stock	$100,000	$100,000
Common stock	89,727	89,727
Additional paid-incapital—common stock	128,906	127,776
Retained earnings	2,397,112	2,136,794
	$2,715,745	$2,454,297
Less: Treasury stock,at cost	(274,452)	(186,680)
Total stockholders’equity	$2,441,293	$2,267,617
Total liabilities andstockholders’ equity	$4,135,105	$3,846,450

StatementItem	January 1,2018 (in thousands)
Total assets	$3,485,233
Total stockholders’ equity	2,083,122

	2019	2018
Gross profit percentage	%	%
Operating margin percentage	%	%
Net profit margin percentage	%	%
Return on assets	%	%
Return on equity	%	%