Exercise 12-8A Calculate profitability ratios (LO12-4)

The balance sheets for Plasma Screens Corporation and additional information are provided below.

PLASMA SCREENS CORPORATION Balance Sheets December 31, 2021 and 2020
	2021				2020
Assets
Current assets:
Cash	$	242,000			$	130,000
Accounts receivable		98,000				102,000
Inventory		105,000				90,000
Investments		5,000				3,000
Long-term assets:
Land		580,000				580,000
Equipment		890,000				770,000
Less: Accumulated depreciation		(528,000	)			(368,000	)
Total assets	$	1,392,000			$	1,307,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	109,000			$	95,000
Interest payable		7,000				13,000
Income tax payable		9,000				6,000
Long-term liabilities:
Notes payable		110,000				220,000
Stockholders' equity:
Common stock		800,000				800,000
Retained earnings		357,000				173,000
Total liabilities and stockholders' equity	$	1,392,000			$	1,307,000

Additional information for 2021:

Net income is $184,000.

Sales on account are $1,890,000.

Cost of goods sold is $1,394,250.

Required: 1. Calculate the following profitability ratios for 2021: (Round your answers to 1 decimal place.)

	Profitability Ratios
a.	Gross profit ratio		%
b.	Return on assets		%
c.	Profit margin		%
d.	Asset turnover		times
e.	Return on equity		%

2. When we compare two companies, can one have a higher return on assets while the other has a higher return on equity?

multiple choice

Yes

No