Consider the following condensed financial statements of Forever Free comma Inc.

ForeverFree,Inc. Thecompany's target rate of return is 40%

Forever Free, Inc.

Income Statement

For the Year Ended December 31, 2018

Net Sales Revenue

$

3,500,000

Cost of Goods Sold

2,200,000

Gross Profit

1,300,000

Operating Expenses

950,000

Operating Income

350,000

Other Income and (Expenses):

Interest Expense

(27,000)

Income Before Income Tax Expense

323,000

Income Tax Expense

113,050

Net Income

$

209,950

Forever Free, Inc.

Comparative Balance Sheet

As of December 31, 2018 and 2017

2018

2017

Assets

Cash

$

64,000

$

52,000

Accounts Receivable

49,200

17,800

Supplies

1,000

400

Property, Plant, and Equipment, net

331,800

229,800

Patents, net

135,000

119,000

Total Assets

$

581,000

$

419,000

Liabilities and Stockholders' Equity

Accounts Payable

$

17,000

$

19,000

Short-term Notes Payable

136,000

42,000

Long-term Notes Payable

184,000

114,500

Common Stock, no Par

232,000

242,000

Retained Earnings

12,000

1,500

Total Liabilities and Stockholders' Equity

$

581,000

$

419,000

Requirement 1. Calculate thecompany's ROI. Round all of your answers to four decimal places.

Begin by selecting the formula to calculate return on investment(ROI), and then enter the amounts to calculate thecompany's ROI. (Round your calculations to four decimal places and enter your final to the nearest hundredth of apercent, X.XX%)

/ = ROI

/ = %

Requirement 2. Calculate thecompany's profit margin ratio. Interpret your results.

Begin by selecting the formula to calculate profit marginratio, and then enter the amounts to calculate thecompany's profit margin ratio. (Enter your final to the nearest hundredth of apercent, X.XX%)

/ = Profit margin ratio

/ = %

The company's profit margin ratio tells us that they earn $ _ of _ for every dollar of _

.

Requirement 3. Calculate thecompany's asset turnover ratio. Interpret your results.

Begin by selecting the formula to calculate asset turnoverratio, and then enter the amounts to calculate thecompany's asset turnover ratio.

/ = Asset turnover ratio

/ =

The company's asset turnover ratio explains how efficiently a company uses its _ to generate _ . The company is generating $ _ of _ with every $1.00 of _

.

Requirement 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results.

First, select the expanded ROI formula.

x = ROI

Using the expanded formula, the ROI for Forever Free, Inc. is

_ %.

To determine what is driving acompany's ROI, management often restates the ROI equation in its expanded form. The ROI calculated with the expanded formula agrees,does not agree with the ROI calculated in Requirement 1.

Requirement 5. Calculate thecompany's RI. Interpret your results.

First, select the formula to calculate residual income(RI).

- ( x ) = RI

The RI for Forever Free, Inc. is $

.

Forever Free comma Inc.

ForeverFree,Inc. is exceeding, not meeting

management's target rate of return.