FOREVER FREE, INC. Income Statement FOREVER FREE, INC. Comparative Balance Sheet As of December 31, 2018 and 2017 For the Year Ended December 31, 2018 Net Sales Revenue $ 3,500,000 2018 2017 Cost of Goods Sold 2,200,000 Assets Gross Profit 1,300,000 Cash $ 64,000 $ 52,000 Operating Expenses Operating Income 950,000 Acsounts Reseivable 49,200 17,800 350,000 Supplies 1,000 400 Other Income and (Expensei): Property. Plant, and Equipment, net 331,800 229,800 Interest Expense (27,000) Patents, net 135,000 119,000 Income Before Income Tax Expense 323,000 Total Assets S 581,000 $ 419,000 Income Tax Expense 113,050 Net Income S 209,950 Liabilities and Stockholders' Equity Accounts Payable $ 19,000 $ 17,000 136,000 Short-term Notes Payable 42,000 Long-term Notes Payable 184,000 114,500 Common Stock, no Par 232,000 242,000 Retained Earnings 12,000 1,500 Total Liabilities and Stockholders' Equity $ 581,000 $ 419,000

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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Using ROI and RI to evaluate investment centers

Consider the following condensed financial statements of Forever Free, Inc. The Company’s target fate of return is 40%

Requirements

  1. Calculate the company’s ROI. Round all of your answers to four decimal places.
  2. Calculate the company’s profit margin ratio. Interpret your results.
  3. Calculate the company’s asset turnover ratio. Interpret your results.
  4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results.
  5. Calculate the company’s RI. Interpret your results.
FOREVER FREE, INC.
Income Statement
FOREVER FREE, INC.
Comparative Balance Sheet
As of December 31, 2018 and 2017
For the Year Ended December 31, 2018
Net Sales Revenue
$ 3,500,000
2018
2017
Cost of Goods Sold
2,200,000
Assets
Gross Profit
1,300,000
Cash
$ 64,000
$ 52,000
Operating Expenses
Operating Income
950,000
Acsounts Reseivable
49,200
17,800
350,000
Supplies
1,000
400
Other Income and (Expensei):
Property. Plant, and Equipment, net
331,800
229,800
Interest Expense
(27,000)
Patents, net
135,000
119,000
Income Before Income Tax Expense
323,000
Total Assets
S 581,000
$ 419,000
Income Tax Expense
113,050
Net Income
S 209,950
Liabilities and Stockholders' Equity
Accounts Payable
$ 19,000
$ 17,000
136,000
Short-term Notes Payable
42,000
Long-term Notes Payable
184,000
114,500
Common Stock, no Par
232,000
242,000
Retained Earnings
12,000
1,500
Total Liabilities and Stockholders' Equity
$ 581,000
$ 419,000
Transcribed Image Text:FOREVER FREE, INC. Income Statement FOREVER FREE, INC. Comparative Balance Sheet As of December 31, 2018 and 2017 For the Year Ended December 31, 2018 Net Sales Revenue $ 3,500,000 2018 2017 Cost of Goods Sold 2,200,000 Assets Gross Profit 1,300,000 Cash $ 64,000 $ 52,000 Operating Expenses Operating Income 950,000 Acsounts Reseivable 49,200 17,800 350,000 Supplies 1,000 400 Other Income and (Expensei): Property. Plant, and Equipment, net 331,800 229,800 Interest Expense (27,000) Patents, net 135,000 119,000 Income Before Income Tax Expense 323,000 Total Assets S 581,000 $ 419,000 Income Tax Expense 113,050 Net Income S 209,950 Liabilities and Stockholders' Equity Accounts Payable $ 19,000 $ 17,000 136,000 Short-term Notes Payable 42,000 Long-term Notes Payable 184,000 114,500 Common Stock, no Par 232,000 242,000 Retained Earnings 12,000 1,500 Total Liabilities and Stockholders' Equity $ 581,000 $ 419,000
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