Chapter 12 O The following income statement and balance sheets for Virtual Gamin

Question

Chapter 12 O The following income statement and balance sheets for Virtual Gaming ezto.mheducation.com/hm.tpx VIRTUAL GAMING SYSTEMS Income Statement For the year ended December 31, 2018 Net sales Cost of goods sold $3,076,000 1,958,000 Gross profit 1,118,000 Expenses Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense $866,000 27,000 8,800 19,000 56,000 Total expenses 976,800 Net income S 141,200 VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2018 Assets Current assets Cash Accounts receivable Inventory Prenaid ront $194.000 89.000 113.000

Explanation / Answer

1. Gross profit ratio = Gross profit/ Net sales

= $1118000 / $3076000

= 36.3%

2. Return on assets = Net income / Average total assets

= $141200/ [($940800+785960)/2]

= $141200/ $863380

= 16.4%

3. Profit margin = Net income /Sales

= $141200/ $3076000

= 4.6%

4. Asset turnover = Sales/ Average total assets

= $3076000/ $863380

= 3.6 times

5. Return on equity = Net income / Average equity

= $141200/ [($547200+410000)/2]

= $141200/ $478600

= 29.5%

6. Price-earnings ratio = Stock price/ Earnings per share

= $28.10/ $1.20

= 23.4

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