The 2024 income statement of Adrian Express reports sales of $21,510,000, cost of goods sold of $12,800,000, and net income of $2,140,000. Balance sheet information is provided in the following table. ADRIAN EXPRESSBalance SheetsDecember 31, 2024 and 2023 20242023Assets Current assets: Cash$920,000$970,000Accounts receivable1,875,0001,265,000Inventory2,385,0001,775,000Long-term assets5,120,0004,450,000Total assets$10,300,000$8,460,000Liabilities and Stockholders' Equity Current liabilities$2,162,000$1,892,000Long-term liabilities2,598,0002,632,000Common stock2,175,0002,065,000Retained earnings3,365,0001,871,000Total liabilities and stockholders' equity$10,300,000$8,460,000Industry averages for the following four risk ratios are as follows: Gross profit ratio45% Return on assets25% Profit margin15% Asset turnover12.5timesReturn on equity35% Required:1. Calculate the five profitability ratios listed above for Adrian Express.2. Do you think the company is more profitable or less profitable than the industry average? Required 1Required 2Calculate the five profitability ratios listed above for Adrian Express. (Round your answers to 1 decimal place.)Profitability RatiosGross profit ratio%Return on assets%Profit marginAsset turnover%timesReturn on equity%

Step 1: Understanding of ratios:- Gross profit ratio compared gross profit earned as compared to…

Answered: Required 1 Required 2 Calculate the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The 2024 income statement of Adrian Express reports sales of $21,510,000, cost of goods sold of $12,800,000, and net income of $2,140,000. Balance sheet information is provided in the following table.

	2024	2023
ADRIAN EXPRESS
Balance Sheets
December 31, 2024 and 2023
Assets
Current assets:
Cash	$920,000	$970,000
Accounts receivable	1,875,000	1,265,000
Inventory	2,385,000	1,775,000
Long-term assets	5,120,000	4,450,000
Total assets	$10,300,000	$8,460,000
Liabilities and Stockholders' Equity
Current liabilities	$2,162,000	$1,892,000
Long-term liabilities	2,598,000	2,632,000
Common stock	2,175,000	2,065,000
Retained earnings	3,365,000	1,871,000
Total liabilities and stockholders' equity	$10,300,000	$8,460,000

Industry averages for the following four risk ratios are as follows:

Gross profit ratio	45%
Return on assets	25%
Profit margin	15%
Asset turnover	12.5	times
Return on equity	35%

Required:
1. Calculate the five profitability ratios listed above for Adrian Express.
2. Do you think the company is more profitable or less profitable than the industry average?