Income Statement Classifications Simon Hardware and Garfunkel Foods Are Sole Proprietorships with Similar

question 95

Essay

Income statement classifications
Simon Hardware and Garfunkel Foods are sole proprietorships with similar amounts of total assets.Also,both businesses earn similar amounts of revenue,incur similar amounts of operating expenses,and report similar net incomes.However,Simon has a higher cost of goods sold,while Garfunkel Foods has higher interest expense.
Indicate which of these companies has the higher (a)gross profit rate,and (b)return on assets.In each case,explain the reasons for each answer.

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Definitions:

Ratio

A mathematical expression that represents the quantitative relationship between two numbers, showing how many times one value contains or is contained by the other.

Output

The total amount of goods or services produced by a firm, industry, or economy in a given period.

Average Fixed Costs

The fixed costs of production divided by the quantity of output produced, decreasing as production increases.

Annual Fixed Cost

The total of all business expenses that remain constant regardless of any change in production levels or sales volume over a year.