Orca Industries Below Are the Two Most Recent Balance Sheets

question 70

Multiple Choice

Orca Industries Below are the two most recent balance sheets and most recent income statement for Orca Industries. The company has an effective tax rate of 35%.
$\begin{array}{llcc}\text { Balance Sheet }&2011&2010 \\ \text { Assets: } &\\ \text { Cash} &\$10,000&\$6,000\\ \text { Accounts Receivable (net) } &6,000&1,500\\ \text { Inventory } &8,000&10,000\\ \text { Long-lived assets} &12,000&11,000\\ \text { Less: Accumulated depreciation } &\underline{(4,000) }&\underline{(2,000) } \\ \text { Total assets } &\underline{\$32,000}&\underline{\$26,500}\\\\ \text { Liabilities and Stockholders' Equity: } &\\ \text {Accounts payable } &\$5,000&\$6,000\\ \text { Deferred revenues } &1,000&2,000\\ \text { Long-term note payable } &10,000&10,000\\ \text { Less: Discount on note payable} & (800) &(1,000) \\ \text {Common stock } &12,000&6,000\\ \text { Retained earnings} &\underline{4,800}&\underline{\$3,500}\\ \text {Total liabilities and stockholders' equity } &\underline{\$32,000}&\underline{\$26,500}\\\\ \text { Income Statement} &\\ \text { For the year ended December 31, 2011 } &\\ \text { Revenues} &&\$42,000\\ \text { Cost of goods sold } &&(24,000) \\ \text { Depreciation expense} &&(2,000) \\ \text { Interest expense } &&(3,000) \\ \text { Bad debt expense} &&(2,000) \\ \text { Other expense (including income taxes) }& &\underline{(9,000) }\\ \text { Net income } &&\underline{\$2,000}\\\end{array}$
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Refer to the information for Orca Industries. The profit margin for computing ROA for Orca Industries is

• A) 9.4%
• B) 13.5%
• C) 4.8%
• D) 12.3%

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Definitions:

Pulse Rate

The number of heartbeats per minute, indicative of heart rate and cardiovascular health.

Gravity

The natural force of attraction exerted by a celestial body, such as Earth, on objects or particles, drawing them toward its center.

Systolic Pressures

The pressure in the arteries when the heart beats and fills them with blood, representing the top number in a blood pressure reading.

Systemic Circuit

A part of the cardiovascular system that carries oxygenated blood away from the heart to the body, and returns deoxygenated blood back to the heart.