FINANCIAL PERFORMANCE :

| March 14, 2016

6. Ordonez Company had the following income statements for 20X1 and 20X2:

20X2

20X1

Sales

$1,600

1,500

Cost of goods sold

960

920

Gross margin

640

580

Operating expenses

224

210

Operating income

416

370

Income taxes

166

148

Net Income

$250

$222

Ordonez Company generally paid dividend approximately equal to its net income. This resulted in the company’s stockholders’ equity totaling $1,480 at the end of both 20X0 and 20X1. However, at the end of 20X2 the company’s total stockholders’ equity was $1,980 primarily because of a large issuance of common stock in mid-20X2.

Compute Ordonez company’s gross margin percentage, the return on sales, and the return on stockholders’ equity for 20X1 and 20X2.
As a stockholder, would have been pleased about the change in performance between 20X1 and 20X2? Explain why or why not.

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