S15-9 Measuring profitability

Requirements 1. Compute the profit margin ratio for Accels Companies for 2018. 2. Compute the rate of return on total assets for 2018. 3. Compute the asset turnover ratio for 2018. 4. Compute the rate of return on common stockholders equity for 2018. 5. Are these rates of return strong or weak? Explain your reasoning.

ACCEL'S COMPANIES Income Statement Years Ended May 31, 2018 and 2017 2018 2017 Net Sales Revenue $ 40,600 28,400 $ 40,500 30,600 Cost of Goods Sold 600 570 Interest Expense All Other Expenses 4,300 8,200 Net Income $ 7,300 $ 1,130 ACCEL'S COMPANIES Balance Sheet May 31, 2018 and 2017 Assets Liabilities 2018 2017 2018 2017 Cash $ 2,400 $ 900 Total Current Liabilities $ 28,000 $ 13,200 Short-term Investments 28,000 10,300 Accounts Receivable 7,500 23,500 Merchandise Inventory 6,900 8,000 Other Current Assets 9,000 Long-term Liabilities 13,900 5,200 Total Liabilities 41,900 8,600 Stockholders' Equity 1,500 Common Stock 11,000 25,200 Retained Earnings 29,900 29,000 Total Equity 40,900 $ 54,200 Total Liabilities and Equity $ 82,800 11,000 Total Current Assets 52,800 19,700 All Other Assets 30,000 30,700 $ 54,200 Total Assets $ 82,800