P-M:9-21A Using ROI and RI to evaluate investment centers Learning Objective 4 Consider the following condensed financial statements of Forever Free, Inc. The companys target rate of return is 409. 2. Aet turroer ratio 7.00 FOREVER FREE, INC Income Statement For the Year Ended December 31, 2024 FOREVER FREE, INC. Comparative Balance Sheet As of December 31, 2024 and 2023 Net Sales Revenue S1,500,000 2024 2023 Cost of Goods Sold Assets 2.200,000 L100,000 150,000 Gros Proft Cash S 4000 $ S2,000 Operating boenses Accounts Recelvabie 4,200 17,00 Operating income 35,000 Supoles L000 400 Other income and (xpensed: Property, Mant, and lauloment, net 2200 Interest Expenoe 27,000 Patents, net 135,000 119,000 Income Before income Tax Expenoe 121,000 Total Assets S SL00 S419,000 Income Tax Expenoe 111,050 Net income S 201,950 Liabilities and Stockholders' Equity S 1,000 $ 17,000 136,000 Accounts Payable Shortterm Notes Payatle 2,000 Long term Notes Payable Common Stock, no par 184,000 114500 212,000 242000 Retained Earnings 12,000 L500 Total Llabies and Stocholders louty S S1,000 $419,000 Requirements 1. Calculate the company's ROL. Round all of your answers to four decimal places. 2. Calculate the company's profit margin ratio. Interpet your resuln. 3. Calculate the company's asset tumover ratio Interpret your results. 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpeet your results. 5. Calculate the company's RI. Interpret your results.
P-M:9-21A Using ROI and RI to evaluate investment centers Learning Objective 4 Consider the following condensed financial statements of Forever Free, Inc. The companys target rate of return is 409. 2. Aet turroer ratio 7.00 FOREVER FREE, INC Income Statement For the Year Ended December 31, 2024 FOREVER FREE, INC. Comparative Balance Sheet As of December 31, 2024 and 2023 Net Sales Revenue S1,500,000 2024 2023 Cost of Goods Sold Assets 2.200,000 L100,000 150,000 Gros Proft Cash S 4000 $ S2,000 Operating boenses Accounts Recelvabie 4,200 17,00 Operating income 35,000 Supoles L000 400 Other income and (xpensed: Property, Mant, and lauloment, net 2200 Interest Expenoe 27,000 Patents, net 135,000 119,000 Income Before income Tax Expenoe 121,000 Total Assets S SL00 S419,000 Income Tax Expenoe 111,050 Net income S 201,950 Liabilities and Stockholders' Equity S 1,000 $ 17,000 136,000 Accounts Payable Shortterm Notes Payatle 2,000 Long term Notes Payable Common Stock, no par 184,000 114500 212,000 242000 Retained Earnings 12,000 L500 Total Llabies and Stocholders louty S S1,000 $419,000 Requirements 1. Calculate the company's ROL. Round all of your answers to four decimal places. 2. Calculate the company's profit margin ratio. Interpet your resuln. 3. Calculate the company's asset tumover ratio Interpret your results. 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpeet your results. 5. Calculate the company's RI. Interpret your results.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:P-M:9-21A Using ROI and RI to evaluate investment centers
Leaming Objective 4
Consider the following condensed financial statements of Forever Free, Inc. The
company's target rate of return is 40.
3. Asset turnover ratio 7.00
FOREVER FREE, INC.
Income Statement
For the Year Ended December 31, 2024
FOREVER FREE, INC.
Comparative Balance Sheet
As of December 31, 2024 and 2023
Net Sales Revenue
$3,500,000
2024
2023
Cost of Goods Sold
Assets
2,200,000
1,300,000
$ 64,000
$ 52,000
Gross Profit
Cash
Operating Expenses
S50,000
Accounts Recelvable
49,200
17,800
Operating Income
350,000
Supples
L000
400
Other Income and (Expense:
Property, Plant, and Equlpment, net
331,800
229,800
Interest Expense
(27,000)
119,000
5 419,000
Patents, net
135,000
S 581,000
Income Before Income Tax Expense
323,000
Total Assets
Income Tax Expense
113,050
Net income
S 200,950
Liabilities and Stockholders' Equity
$ 17,000
$ 19,000
Accounts Payable
Short-term Notes Payable
136,000
42,000
Long-term Notes Payable
184,000
114500
Common Stock, no par
232,000
242,000
Retalned Earnings
12,000
5 581,000
1,500
5 419,000
Total Llabilitles and Stockholders' Equity
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 tumover 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.
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