Question

The balance sheets for Plasma Screens Corporation and additional information are provided below.

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2018 and 2017
	2018		2017
Assets
Current assets:
Cash	$	242,000	$	130,000
Accounts receivable		98,000		102,000
Inventory		105,000		90,000
Investments		5,000		3,000
Long-term assets:
Land		580,000		580,000
Equipment		890,000		770,000
Less: Accumulated depreciation		(528,000)		(368,000)
Total assets	$	1,392,000	$	1,307,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	109,000	$	95,000
Interest payable		7,000		13,000
Income tax payable		9,000		6,000
Long-term liabilities:
Notes payable		110,000		220,000
Stockholders' equity:
Common stock		800,000		800,000
Retained earnings		357,000		173,000
Total liabilities and stockholders' equity	$	1,392,000	$	1,307,000
				Additional information for 2018:   1. Net income is $184,000. 2. Sales on account are $1,890,000. 3. Cost of goods sold is $1,394,250. Required: 1. Calculate the following profitability ratios for 2018: (Round your answers to 1 decimal place.)
a. gross profit ratio b. return on assets c. profit margin d. asset turnover e. return on equity

Answer 1

Req 1.
Sales			1890000
Less: Cost of goods sold			1394250
Gross profit			495750
Divide: Sales			1890000
Gross profit margin			26.23%
Req 2.
Return on assets:
Net Income			184000
Divide: Average Total assets			1349500	(1392000+1307000)/2
Return on assets:			13.63%
Req 3.
Profit Margin:
Net Income			184000
Divide: Sales revenue			1890000
Profit Margin:			9.74%
Req 4.
Assets Turnover:
Sales			1890000
Divide: Average Total assets			1349500
Assets Turnover:			1.4
Req 5.
Return on Equity:
Net Income			184000
Divide: Average Stockholder's equity			1065000
Return on Equity:			17.28%
Note: Average Stockholder's equity:
Stockholder's equity in beginning			1157000	(800000+357000)
Stockholder's equity at the end			973000	(800000+173000)
Average stockholders equity			1065000