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Use the following information about CDD Corporation to calculate the following ratios for 2019 (assume an effective tax rate of 35%). State, with reasons, whether

Use the following information about CDD Corporation to calculate the following ratios for 2019 (assume an effective tax rate of 35%).

State, with reasons, whether or not an investor should invest in the company on the terms outlined.

1.

Return on Assets

2.

Gross profit margin

3.

Assets Turnover

4.

Return on Common Shareholders Equity

5.

Accounts Receivable Turnover

6.

Inventory Turnover

CDD Corporation

Balance Sheet

As of December 31,

2019

2018

Assets:

Cash and cash equivalents

$ 712,300

$ 425,000

Accounts Receivable

408,000

106,250

Inventory

510,000

612,000

Current Assets

1,630,300

1,143,250

Equipment

714,000

654,500

Less: Accumulated depreciation

(238,000)

(119,000)

Land

425,000

170,000

Total assets

$2,531,300

$1,848,750

Liabilities

Accounts Payable

$ 297,500

$ 382,500

Accrued Salaries Payable

93,500

136,000

Rent Expense Payable

37,400

17,000

Income Tax Payable

117,300

68,000

Current Liabilities

545,700

603,500

Long-term note payable

850,000

510,000

Total Liabilities

1,395,700

1,113,500

Stockholders Equity:

Common stock

714,000

510,000

Retained earnings

421,600

225,250

Total liabilities and stockholders equity

$2,531,300

$1,848,750

CDD Corporation

Income Statement

For the year ended December 31, 2019

Revenues

$2,499,000

Cost of goods sold

(1,428,000)

Gross Profit

1,071,000

Operating Expenses

Depreciation expense

(112,000)

Salary expense

(233,600)

Insurance Expense

(40,000)

Rent Expense

(160,000)

Interest Expense

(67,200)

Total Operating Expenses

(612,800)

Income from Operations

458,200

Income Tax Expense

(160,370)

Net income

$ 297,830

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