Problem 12-5A Calculate profitability ratios (LO12-4)

The following income statement and balance sheets for Virtual Gaming Systems are provided.

VIRTUAL GAMING SYSTEMS Income Statement For the year ended December 31, 2018
Net sales		$2,991,000
Cost of goods sold		1,941,000
Gross profit		1,050,000
Expenses:
Operating expenses	$849,000
Depreciation expense	27,000
Loss on sale of land	7,100
Interest expense	10,500
Income tax expense	39,000
Total expenses		932,600
Net income		$ 117,400

VIRTUAL GAMING SYSTEMS Balance Sheets December 31
	2018	2017
Assets
Current assets:
Cash	$177,000	$135,000
Accounts receivable	72,000	51,000
Inventory	96,000	126,000
Prepaid rent	11,100	4,920
Long-term assets:
Investment in bonds	96,000	0
Land	201,000	231,000
Equipment	261,000	201,000
Less: Accumulated depreciation	(60,000)	(33,000)
Total assets	$854,100	$715,920
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 57,000	$ 100,220
Interest payable	4,200	2,100
Income tax payable	10,500	13,100
Long-term liabilities:
Notes payable	276,000	216,000
Stockholders' equity:
Common stock	291,000	291,000
Retained earnings	215,400	93,500
Total liabilities and stockholders equity	$854,100	$715,920

Earnings per share for the year ended December 31, 2018, are $1.40. The closing stock price on December 31, 2018, is $26.40.

Required:

Calculate the following profitability ratios for 2018. (Round your answers to 1 decimal place.)

1.Gross proft ratio

2. Return on assets

3. Profit margin

4. Asset turnover

5. Return on equity

6. Price-earnings ratio