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:
Less profitable
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
ADRIAN EXPRESS
Balance Sheets
December 31, 2021 and 2020
                                                                           2021                  2020
Assets
Current assets:
Cash                                                              $840,000            $930,000
Accounts receivable                                     1,775,000            1,205,000
Inventory                                                      2,245,000            1,675,000
Current assets                                          $4,860,000          $3,810,000
Long-term assets                                        5,040,000            4,410,000
Total assets                                             $ 9,900,000         $8,220,000
Liabilities and Stockholders' Equity
Current liabilities                                     $ 2,074,000          $1,844,000
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
= 37.4%