Exercise 12-10

Carla Vista Medical manufactures hospital beds and other institutional furniture. The companys comparative balance sheet and income statement for 2015 and 2016 follow.

Carla Vista Medical Comparative Balance Sheet As of December 31
		2016		2015
Assets
Current assets
Cash		$300,000		$417,500
Accounts receivable, net		1,065,200		776,400
Inventory		726,000		681,000
Other current assets		374,000		247,000
Total current assets		2,465,200		2,121,900
Property, plant, & equipment, net		8,852,440		8,430,430
Total assets		$11,317,640		$10,552,330
Liabilities and Stockholders Equity
Current liabilities		$3,118,000		$2,846,100
Long-term debt		3,702,600		3,892,650
Total liabilities		6,820,600		6,738,750
Preferred stock, $5 par value		58,600		58,600
Common stock, $0.25 par value		140,000		103,850
Retained earnings		4,298,440		3,651,130
Total stockholders equity		4,497,040		3,813,580
Total liabilities and stockholders equity		$11,317,640		$10,552,330

Carla Vista Medical Comparative Income Statement and Statement of Retained Earnings For the Year
		2016		2015
Sales revenue (all on account)		$10,420,000		$9,613,950
Cost of goods sold		5,637,000		5,298,750
Gross profit		4,783,000		4,315,200
Operating expenses		2,840,200		2,634,100
Net operating income		1,942,800		1,681,100
Interest expense		393,000		308,700
Net income before taxes		1,549,800		1,372,400
Income taxes (30%)		464,940		411,720
Net income		$1,084,860		$960,680
Dividends paid
Preferred dividends		29,550		29,550
Common dividends		408,000		416,000
Total dividends paid		437,550		445,550
Net income retained		647,310		515,130
Retained earnings, beginning of year		3,651,130		3,136,000
Retained earnings, end of year		$4,298,440		$3,651,130

Calculate the following profitability ratios for 2016 . (Round answers to 1 decimal place, eg, 50.1%.) 45.90 a. Gross margin percentage 9.6 b. Return on assets 23.8 c. Return on common stockholders' equity