Question 2

Claret Corporation's comparative balance sheets and an income statement are as follows:

Claret Corporation

Balance Sheet

31 December 2015 31 December 2014

	$	$
Cash	15,600	15,600
Accounts receivable	46,800	37,700
Inventory	32,500	36,400
Equipment (net)	57,200	66,300
	152,100	156,000
Accounts payable	26,000	28,600
Dividends payable	7,800	14,300
Long-term note payable	14,300	14,300
Capital stocks @$5 par	72,800	72,800
Retained earnings	31,200	36,400
	152,100	156,000

All sales were made on Account. Cash dividends declared during the year totaled $11,492.

Claret Corporation

Income Statement for the year ended 31 December 2015

Sales	$ 228,800
Cost of goods sold	($ 137,540)
Gross profit	$ 91,260
Operating expenses	($ 75,868)
Net profit before interest expense and income tax	$15,392
Interest expense and Income tax	($ 9,100)
Net profit after interest expense and income tax	$6,292

Required:

Compute the following ratios for the year ended 31 December 2015 (round to the nearest 2 decimal places):

a. Return on assets

b.Return on Equity

c. Accounts receivable turnover

d. Inventory turnover

e. Gross profit margin