Orca Industries
Below Are the Two Most Recent Balance Sheets

question 5

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%.
Balance Sheet
$\begin{array}{l}\begin{array}{lll}\\\text {Assets:}\\\text {Cash}\\\text {Accounts Receivable (net) }\\\text {Inventory}\\\text {Long-lived assets}\\\text {Less: Accumulated depreciation}\\\text {Total assets}\\\end{array}\begin{array}{lll}2011&2010\\\\\$ 10,000 & \$ 6,000 \\6,000 & 1,500 \\8,000 & 10,000 \\12,000 & 11,000 \\\underline{(4,000) } & \underline{(2,000) } \\\underline{\$ 32,000 }& \underline{\$ 26,500}\end{array}\end{array}$


$\text { Liabilities and Stockholders' Equity: }$
$\begin{array}{lrr}\text { Accounts payable } & \$ 5,000 & \$ 6,000 \\\text { Deferred revenues } & 1,000 & 2,000 \\\text { Long-term note payable } & 10,000 & 10,000 \\\text { Less: Discount on note payable } & (800) & (1,000) \\\text { Common stock } & 12,000 & 6,000 \\\text { Retained earnings } &\underline{ 4,800 }&\underline{3,500}\\\text { Total liabilities and stockholders' equity } &\underline{ \$ 32.000 }&\underline{ \$ 26,500}\\\end{array}$


Income Statement
For the year ended December 31, 2011
$$\begin{array}{l}\begin{array} { l } \text { Revenues }& \$42,000 \\\text { Cast af goods sold }&( 24,000 ) \\\text { Depreciation expense } &( 2,000 ) \\\text { Interest expense } &( 3,000 ) \\\text { Bad debt exanense }&( 2,000 ) \\\text { Other expense (including income taxes) }&\underline{(9,000) } \\\text { Net incame }&\underline{\$2,000}\end{array}\\\begin{array} { l } \end{array}\end{array}$$
-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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