Question

Problem 12-5A Calculate profitability ratios (LO12-4)

The following income statement and balance sheets for Virtual Gaming Systems are provided.

VIRTUAL GAMING SYSTEMS
Income Statement
For the year ended December 31, 2021
Net sales					$	3,076,000
Cost of goods sold						1,958,000
Gross profit						1,118,000
Expenses:
Operating expenses	$	866,000
Depreciation expense		27,000
Loss on sale of land		8,800
Interest expense		19,000
Income tax expense		56,000
Total expenses						976,800
Net income					$	141,200

VIRTUAL GAMING SYSTEMS
Balance Sheets
December 31
	2021				2020
Assets
Current assets:
Cash	$	194,000			$	152,000
Accounts receivable		89,000				68,000
Inventory		113,000				143,000
Prepaid rent		12,800				6,960
Long-term assets:
Investment in bonds		113,000				0
Land		218,000				248,000
Equipment		278,000				218,000
Less: Accumulated depreciation		(77,000	)			(50,000	)
Total assets	$	940,800			$	785,960
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	74,000				$ 124,360
Interest payable		7,600				3,800
Income tax payable		19,000				14,800
Long-term liabilities:
Notes payable		293,000				233,000
Stockholders' equity:
Common stock		308,000				308,000
Retained earnings		239,200				102,000
Total liabilities and stockholders’ equity	$	940,800			$	785,960

Earnings per share for the year ended December 31, 2021, are $1.20. The closing stock price on December 31, 2021, is $28.10.

Required:

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

1. Gross Profit Ratio ___%

2. Return on Assets ___%

3. Profit Margin ____%

4. Asset Turnover ____ time

5. Return on Equity ____%

6. Price-earnings ratio ____

Answer 1