Question

Income statement and balance sheet data for Great Adventures, Inc., are provided below.

GREAT ADVENTURES, INC.
Income Statement
For the year ended December 31, 2022
Net sales revenues				$	193,410
Interest revenue					400
Expenses:
Cost of goods sold	$	39,900
Operating expenses		68,480
Depreciation expense		18,650
Interest expense		10,276
Income tax expense		15,900
Total expenses					153,206
Net income				$	40,604

GREAT ADVENTURES, INC.
Balance Sheets
December 31, 2022 and 2021
	2022				2021
Assets
Current assets:
Cash	$	300,210			$	64,780
Accounts receivable		50,120				0
Inventory		9,800				0
Other current assets		1,180				5,620
Long-term assets:
Land		780,000				0
Buildings		870,000				0
Equipment		90,840				54,000
Accumulated depreciation		(28,050	)			(8,700	)
Total assets	$	2,074,100			$	115,700
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	23,600			$	3,360
Interest payable		1,450				890
Income tax payable		15,900				14,280
Other current liabilities		29,400				0
Notes payable (current)		76,301				0
Notes payable (long-term)		733,955				32,800
Stockholders’ equity:
Common stock		148,000				29,520
Paid-in capital		1,158,800				0
Retained earnings		60,694				34,850
Treasury stock		(174,000	)			0
Total liabilities and stockholders’ equity	$	2,074,100			$	115,700

As you can tell from the financial statements, 2022 was an especially busy year. Tony and Suzie were able to use the money received from borrowing and the issuance of stock to buy land and begin construction of cabins, dining facilities, ropes course, and the outdoor swimming pool. They even put in a baby pool to celebrate the birth of their first child.

2. Calculate the following profitability ratios for 2022. (Use 365 days in a year. Round your intermediate calculations and final answers to 1 decimal place.)

	a. Gross profit ratio. (Hint: Use net sales revenues)   % b. Return on assets.   % c. Profit margin. (Hint: Use net sales revenues)   % d. Asset turnover. (Hint: Use net sales revenues)   times e. Return on equity.   %

Answer 1

	2. Calculation of following profitability ratios for 2022.
	a.)	Gross Profit Ratio:
		=( Gross Profit x 100 ) / Net Sales Revenue
		=( 153,510 x 100 ) / 193,410
		=15,351,000 / 193,410
		=79.4%
		Gross Profit= 193,410 - 39,900
		= $ 153,510
	b.)	Return on Assets:
		=( Net Income x 100 ) / Total Assets
		= (40,604 x 100 ) / 2,074,100
		= 4,060,400 / 2,074,100
		= 1.9%
	c.)	Profit Margin:
		=( Net Income x 100 ) / Net Sales Revenue
		=( 40,604 x 100 ) / 193,410
		= 4,060,400 / 193,410
		= 20.9%
	d.)	Asset Turnover:
		= Net Sales Revenue / Average Total Assets
		= 193,410 / ( (2,074,100 + 115,700 ) / 2 )
		= 193,410 / 1,094,900
		= 0.2 Times
	e.)	Return on Equity:
		=( Net Income x 100 ) / Average Stockholder's Equity
		= (193,410 x 100 ) / ( ( 1,193,494 + 64,370 ) / 2)
		= 19,341,000 / 628,932
		= 30.7%