Exam 14: Managerial Accounting

The disposal of a significant component of a business is called

The following information pertains to Rural Company.Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments \ 40,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant and equipment 215,000 Total Assets \3 10,000 Liabilities and Stockholders' Equity Current liabilities \ 60,000 Long-term liabilities 75,000 Stockholders' equity-common 175,000 Total Liabilities and Stockholders' Equity \3 10,000 Income Statement Sales \1 30,000 Cost of goods sold 405,000 Gross profit \8 5,000 Operating expenses 25,000 Net income \6 0,000 Number of shares of common stock 5,000 Market price of common stock \ 21 Dividends per share 1.00 What is the profit margin for Rural?

Vertical analysis is useful in making comparisons of companies of different sizes.

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.