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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	%	%