10: Application of Financial Ratios Used to Measure Profitability The income statement of Garnet Mfg. Corp. for 2018 shows the following: Sales, net Net credit sales Cost of goods sold Cost of goods manufactured Net credit purchases Raw materials used Net income Total operating expenses Depreciation Net income P 700,000 15,000 400,000 410,000 150,000 225,000 90,000 212,500 20,000 90,000 The balance sheet figures as of December 31, 2017 and 2018 are as follows: December 31 2017 P12,500 17,500 10,000 2018 P 25,000 28,750 20,000 Cash Marketable securities Accounts receivable, net Inventories: Finished goods Work in process Raw materials Prepaid expenses Total current assets Investments Plant, property and equipment, net 25,000 17,500 10,000 2,500 P95,000 37,500 117,500 35,000 22,500 15,000 3,750 P 150,000 37,500 187,500 Total assets P250,000 P375,000 Accounts payable Notes payable Total current liabilities Long-term debt Total liabilities 5% Preferred stock, par P 50 Common stock, par P 100 Premium on preferred stock Premium on common stock Retained earnings Total stockholder's equity Total liabilities and stockholder's equity P 37,500 12,500 P 50,000 75,000 125,000 25,000 50,000 7,500 10,000 32,500 P125,000 P250,000 P 80,000 20,000 P100,000 75,000 175,000 35,000 65,000 15,000 12,500 72,500 P200,000 P375,000 Market price per share of common stock is P 682.70. (One year= 360 days) Instruction: Compute for the following ratios: a. Rate of return sales b. Rate of return on total assets C. Asset turnover d. Gross profit ratio e. Operating ratio f. Rate of return on current assets 8. Current asset turnover h. Rate of return per current asset turnover i. Rate of return on working capital j Working capital turnover k. Rate of return per working capital turnover 1. Invested capital turnover m. Earnings per share n. Price-earnings ratio o. Capitalization ratio p. Dividends per share q. Yield on common stock r. Dividend payout ratio Price to book value t. Retained earnings to capital stock S