Use This Balance Sheet and Income Statement for the First

question 11

Multiple Choice

Use this balance sheet and income statement for the first year of operations for Layton Novelties,Inc.to answer the following question.Use ending balances whenever average balances are required for computing ratios. $\begin{array}{c} \text {Layton Novelties. Inc.}\\ \text {Income Statement}\\ \text {For the Year Ended December 31, 2010}\\\begin{array}{llr} \text { Net sales } &\$80,000\\ \text { Costs of goods sold } &32,000\\ \text { Gross margin } &\$48,000\\ \text { Operating expenses} &12,000\\ \text {Income before income taxes } &\$36,000\\ \text { Income taxes } &14,400\\ \text { Net income} &\$21,600\end{array}\end{array}$

The return on assets for Layton Novelties is

• A) 40 percent.
• B) 70 percent.
• C) 18 percent.
• D) 66-2/3 percent.

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Definitions:

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Interest-Sensitive Goods

These are goods whose demand fluctuates in response to changes in interest rates, often because they involve large financial investments or credit to purchase.

Financial Crisis

A situation where financial assets suddenly lose a significant part of their nominal value, often leading to bankruptcies and economic downturns.

Regulatory Changes

Modifications or updates in laws and regulations that affect how businesses operate and compete.