Question: Refer to the information provided for Plasma Screens Corporation in E12-7.
Required: 1. Calculate the following profitability ratios for 2012:
a. Gross profit ratio.
b. Return on assets.
c. Profit margin.
d. Asset turnover.
e. Return on equity.
2. When we compare two companies, can one have a higher return on assets while the other has a higher return on equity? Explain your answer.
E12-7: The balance sheet for Plasma Screens Corporation and additional information are provided below.
Additional Information for 2012:
1. Net income is $69,000.
2. Sales on account are $1,520,000.
3. Cost of goods sold is $1,160,000.
Required: 1. Calculate the following risk ratios for 2012:
a. Receivables turnover ratio.
b. Inventory turnover ratio.
c. Current ratio.
d. Acid-test ratio.
e. Debt to equity ratio.
2. When we compare two companies, can one have a higher current ratio while the other has a higher acid-test ratio? Explain your answer.