The following income statement and balance sheets for Laser World are provided:
ID: 2533517 • Letter: T
Question
The following income statement and balance sheets for Laser World are provided:
Earnings per share for the year ended December 31, 2018, is $1.40. The closing stock price on December 31, 2018, is $31.00.
Calculate the following profitability ratios for 2018 (Do not round intermediate calculations. Round your answers to 1 decimal place.):
Gross profit ratio
Return on assets
Profit margin
Asset turnover
Return on equity
Price-earnings ratio
LASER WORLDIncome Statement
For the year ended December 31, 2018 Sales revenue $ 2,380,400 Cost of goods sold 1,560,000 Gross profit 820,400 Expenses: Operating expenses 343,000 Depreciation expense 61,000 Loss on sale of land 4,400 Interest expense 22,000 Income tax expense 54,000 Total expenses 484,400 Net income $ 336,000
Explanation / Answer
(a)Gross Profit Ratio
Gross Profit Ratio = (Gross Profit / Net Sales Revenue) * 100
= [$8,20,400 / $23,80,400 ] x 100
= 34.46%
(b) Return on assets
= [ Net Income / Average Total Assets ] x 100
= $336000 / [ (1086000 + 883000) / 2 ] x 100
= [ $336000 / 984500 ] x 100
= 34.13%
(c) Profit margin
= [ Net Income / Sales ] x 100
= [ 336000 / 2380400 ] x 100
= 14.12%
(e) Asset turnover
= [ Sales / Average Total Assets ] x 100
= [ $2380400 / (1086000 + 883000) / 2 ]
= $2380400 / 984500
= 2.42
(f) Return on equity
= [ Net Income / Stockholders' equity] x 100
={ $336000 / 557900 ] x 100
= 60.23%
(g) Price-earnings ratio
= Market Price / Earnings Per Share
= $31 / 1.40
= 22.14 Times
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