Sheridan Medical manufactures hospital beds and other institutional furniture. T

Question

Sheridan Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2015 and 2016 follow.

Calculate the following profitability ratios for 2016. (Round answers to 1 decimal place, e.g. 50.1%.)

Sheridan Medical
Comparative Balance Sheet
As of December 31 2016 2015 Assets Current assets   Cash $341,000 $417,400   Accounts receivable, net 1,065,700 776,450   Inventory 746,000 681,050   Other current assets 348,000 247,100 Total current assets 2,500,700 2,122,000 Property, plant, & equipment, net 8,866,025 8,396,315   Total assets $11,366,725 $10,518,315 Liabilities and Stockholders’ Equity Current liabilities $3,101,000 $2,846,000 Long-term debt 3,702,650 3,892,700   Total liabilities 6,803,650 6,738,700 Preferred stock, $5 par value 50,500 50,500 Common stock, $0.25 par value 106,000 103,900 Retained earnings 4,406,575 3,625,215   Total stockholders’ equity 4,563,075 3,779,615   Total liabilities and stockholders’ equity $11,366,725 $10,518,315

Explanation / Answer

Gross margin percentage ( 2016 ) :- ( Gross margin / Sales ) * 100 = ( 4,989,000 / $10,290,000 ) * 100 = 48.48 %

Return on assets ( 2016 ) :- Net income / Average total assets

$1,231,860 / [ ( $11,366,725 + $10,518,315 ) / 2 ] =

$1,231,860 / 10942520 = 11.26 %

Return on common stockholders’ equity ( 2016 ) :- ( Net income - Preferred dividends ) / Average common stockholders’ equity

( $1,231,860 - 29,500 ) / [ ( 106,000 + 4,406,575 + 103,900 + 3,625,215 ) / 2 ] =

1202360 / 4120845 =

29.18 %

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