The Following Income Statement and Balance Sheets for Laser World

question 12

Essay

The following income statement and balance sheets for Laser World are provided:
$$\begin{array} { | c | }\hline\text { Laser World } \\\text { Income Statement }\\\text { For the year-ended December 31, 2012 }\\ \hline { \begin{array} {lr } \text { Sales revenue } & \$ 2,200,000 \\\text { Cost of goods sold } & 1,500,000 \\\text { Gross profit } & 700,000\\\text { Expenses: }\\\text { Operating expenses } & 350,000 \\\text { Depreciation expense } & 70,000 \\\text { Loss on sale of land } & 5,000 \\\text { Interest expense } & 25,000 \\\text { Income tax expense } & 60,000\\\text { Total expenses }&510,000\\\text { Net income }&\$190,000\\\end{array} } \\\hline\end{array}$$

Earnings per share for the year-ended December 31,2012,is $1.90.The closing stock price on December 31,2012,is $30.40.
Calculate the following profitability ratios for 2012:
$\begin{array}{ll}\text { 1. Gross profit ratio } & \text { 4. Asset turnover } \\\text { 2. Return on assets } & \text { 5. Return on equity } \\\text { 3. Profit margin } & \text { 6. Price-earnings ratio }\end{array}$

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Definitions:

Dishonor

The refusal or inability of an entity to fulfill a financial obligation, such as a check or bill.

Primarily Liable

Refers to the primary obligation or responsibility for fulfilling a debt or obligation, typically before any secondary or tertiary parties.

Accepts Check

The process of agreeing to take a check as a method of payment.

Party Status

The recognition of being a participant or member in a legal action or in a contractual or political relationship.