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2 years ago

When the supply of a commodity decreases while demand remains the same price tends to:_____.

Business

1 answer:

postnew [5]2 years ago

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When the supply of a commodity decreases while demand remains same then the same price tends to increase.

Given that the supply of a commodity decreases while the demand remains same.

We are required to find the effect of decrease of supply on the price of the commodity if the demand remains same.

Supply is the amount of good that the producer manufactures and sends to the market.

Demand is the amount of good that the consumer wants to consume.

When the supply of a commodity decreases,the supply will shift leftwards. The demand remains same then from the graph we can find that the price of the commodity increases from P to P1.

Hence when the supply of a commodity decreases while demand remains same then the same price tends to increase.

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Answer:

Adrian Express

1. Five Profitability Ratios:

Gross profit ratio: = 39.2%

Return on assets = 20%

Profit margin = 9.6%

Asset turnover = 2.1 times

Return on equity = 37.4%

2. I think the company is:

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than the industry average.

Explanation:

a) Data and Calculations:

Sales Revenue $20,710,000

Cost of goods sold $12,600,000

Gross profit $8,110,000

Net income $1,980,000

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Balance Sheets

December 31, 2021 and 2020

2021 2020

Assets

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Accounts receivable 1,775,000 1,205,000

Inventory 2,245,000 1,675,000

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Long-term assets 5,040,000 4,410,000

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Long-term liabilities 2,526,000 2,584,000

Common stock 2,075,000 2,005,000

Retained earnings 3,225,000 1,787,000

Total Equity 5,300,000 3,792,000

Total liabilities & stockholders' equity $9,900,000 $8,220,000

Industry averages for the following profitability ratios are as follows:

Gross profit ratio 45 %

Return on assets 25 %

Profit margin 15 %

Asset turnover 8.5 times

Return on equity 35 %

Gross profit ratio: = Gross profit/Sales * 100

= $8,110,000/$20,710,000 * 100

= 39.2%

Return on assets = Net income/Assets * 100

= $1,980,000/$9,900,000 * 100

= 20%

Profit margin = Net Income/Sales * 100

= $1,980,000/$20,710,000 * 100

= 9.6%

Asset turnover = Sales/Total Assets

= $20,710,000/$9,900,000 = 2.1 times

Return on equity = Net Income/Total Equity * 100

= $1,980,000/$5,300,000 * 100

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