Question

# Problem 12-6B Use ratios to analyze risk and profitability (LO12-3, 12-4) [The following information applies to...

Problem 12-6B Use ratios to analyze risk and profitability (LO12-3, 12-4)

[The following information applies to the questions displayed below.]

Income statement and balance sheet data for The Athletic Attic are provided below.

 THE ATHLETIC ATTIC Income Statements For the years ended December 31 2022 2021 Net sales \$ 10,680,000 \$ 9,100,000 Cost of goods sold 6,980,000 5,600,000 Gross profit 3,700,000 3,500,000 Expenses: Operating expenses 1,620,000 1,570,000 Depreciation expense 200,000 200,000 Interest expense 42,000 42,000 Income tax expense 424,000 370,000 Total expenses 2,286,000 2,182,000 Net income \$ 1,414,000 \$ 1,318,000
 THE ATHLETIC ATTIC Balance Sheets December 31 2022 2021 2020 Assets Current assets: Cash \$ 227,000 \$ 156,000 \$ 208,000 Accounts receivable 992,000 742,000 762,000 Inventory 1,727,000 1,357,000 1,027,000 Supplies 132,000 102,000 77,000 Long-term assets: Equipment 1,180,000 1,180,000 1,180,000 Less: Accumulated depreciation (620,000 ) (420,000 ) (220,000 ) Total assets \$ 3,638,000 \$ 3,117,000 \$ 3,034,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable \$ 180,800 \$ 111,000 \$ 88,800 Interest payable 4,200 0 4,200 Income tax payable 42,000 37,000 32,000 Long-term liabilities: Notes payable 520,000 520,000 520,000 Stockholders' equity: Common stock 620,000 620,000 620,000 Retained earnings 2,271,000 1,829,000 1,769,000 Total liabilities and stockholders’ equity \$ 3,638,000 \$ 3,117,000 \$ 3,034,000

Problem 12-6B Part 2

2. Calculate the following profitability ratios for 2021 and 2022: (Round your answers to 1 decimal place.)

Gross Profit Ratio _____________ For 2021.

Gross Profit Ratio ________________ for 2022

Return on assets for 2021 and 2022

profit margin for 2021 and 2022

asset turnover 2021 and 2022.

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