The following condensed information is reported by Sporting Collectibles.

2018 2017

Income Statement Information Sales revenue $ 14,820,000 $ 9,400,000

Cost of goods sold 9,544,080 6,900,000

Net income 418,000 348,000

Balance Sheet Information Current assets $ 1,700,000 $ 1,600,000

Long-term assets 2,300,000 2,000,000

Total assets $ 4,000,000 $ 3,600,000

Current liabilities $ 1,300,000 $ 1,000,000

Long-term liabilities 1,400,000 1,400,000

Common stock 900,000 900,000

Retained earnings 400,000 300,000

Total liabilities and stockholders' equity $ 4,000,000 $ 3,600,000

Required:

Calculate the following profitability ratios for 2018

Gross profit ratio %
Return on assets %
Profit margin %
Asset turnover times
Return on equity %

Gross profit ratio % = 35.60%

Return on assets % = 10.45%

Profit margin % = 2.82%

Asset turnover times = 3.90 times

Return on equity % = 46.44%

Explanation:

a. Gross profit ratio %

Gross profit = Sales revenue - Cost of good sold =  $14,820,000 - $9,544,080 = $5,275,920

Gross profit ratio % = (Gross profit / Sales revenue) * 100 = ($5,275,920 / $14,820,000) * 100 = 35.60%

b. Return on assets %

Return on assets % = (Net income / Total assets) * 100 = ($418,000/$4,000,000) * 100 = 10.45%

c. Profit margin %

Profit margin % = (Net income / Sale revenue) * 100 = ($418,000/$14,820,000) * 100 = 2.82%

d. Asset turnover times

Average total asset = ($4,000,000 + $3,600,000) / 2 = $3,800,000

Asset turnover times = Sales revenue / Average total asset = $14,820,000/$3,800,000 = 3.90 times

e. Return on equity %

Return on equity % = (Net income / Common stock) * 100 = ($418,000/$900,000) * 100 = 46.44%

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know