Question
The following data was reported by LMS for a two-year period: 20x11 20x12 Sales revenue (one-fourth on credit) $84,000 $120,000 Cost of goods sold (51,000)
The following data was reported by LMS for a two-year period:
|
| 20x11 | 20x12 |
| Sales revenue (one-fourth on credit) | $84,000 | $120,000 |
| Cost of goods sold | (51,000) | (65,000) |
| Operating expenses* | (23,000) | (27,000) |
| Income tax (20%) | (2,000) | (5,600) |
| Net income | $8,000 | $22,400 |
Assets:
| Cash | $15,000 | $11,000 |
| Accounts receivable (net) | 20,000 | 26,000 |
| Inventory | 35,000 | 39,000 |
| Capital assets (net) | 40,000 | 44,000 |
| Total assets | $110,000 | $120,000 |
Liabilities:
| Current liabilities | $30,000 | $29,000 |
| Long-term liabilities | 23,000 | 20,000 |
| Shareholders' equity: Common shares, 5,000 shares issues | 50,000 | 50,000 |
| Retained earnings | 7,000 | 21,000 |
| Total liabilities & shareholders' equity | $110,000 | $120,000 |
*Includes interest expense, $2,500 (pre-tax)
Compute the following ratios for 20x12:
(1) Profit margin on sales
(2) Return on total assets
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