The balance sheets for Monitor World Corporation and additional information are provided below. MONITOR WORLD CORPORATIONBalance SheetsDecember 31, 2024 and 2023 20242023Assets Current assets: Cash$176,400$125,000Accounts receivable88,00097,000Inventory100,00085,000Investments4,5002,500Long-term assets: Land530,000530,000Equipment840,000720,000Less: Accumulated depreciation(478,000)(318,000)Total assets$1,260,900$1,241,500Liabilities and Stockholders' Equity Current liabilities: Accounts payable$104,000$90,000Interest payable6,50012,500Income tax payable8,5005,500Long-term liabilities: Notes payable120,000240,000Stockholders' equity: Common stock750,000750,000Retained earnings271,900143,500Total liabilities and stockholders' equity$1,260,900$1,241,500Additional information for 2024:Net income is $128,400.Sales on account are $1,702,000. (All sales are credit sales.)Cost of goods sold is $1,276,500.Required:1. Calculate the following profitability ratios for 2024:2. When we compare two companies, can one have a higher return on assets while the other has a higher return on equity? Required 1Required 2Calculate the following profitability ratios for 2024: (Round your answers to 1 decimal place.)Profitability Ratiosa. Gross profit ratio%b. Return on assets%%c. Profit margind. Asset turnovere. Return on equitytimes%

Step 1: Introduction to ratio analysisRatio analysis is a method used to analyze financial…

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Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter9: Projecting Financial Statements

Section: Chapter Questions

Problem 1aM

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The balance sheets for Monitor World Corporation and additional information are provided below.

	2024	2023
MONITOR WORLD CORPORATION
Balance Sheets
December 31, 2024 and 2023
Assets
Current assets:
Cash	$176,400	$125,000
Accounts receivable	88,000	97,000
Inventory	100,000	85,000
Investments	4,500	2,500
Long-term assets:
Land	530,000	530,000
Equipment	840,000	720,000
Less: Accumulated depreciation	(478,000)	(318,000)
Total assets	$1,260,900	$1,241,500
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$104,000	$90,000
Interest payable	6,500	12,500
Income tax payable	8,500	5,500
Long-term liabilities:
Notes payable	120,000	240,000
Stockholders' equity:
Common stock	750,000	750,000
Retained earnings	271,900	143,500
Total liabilities and stockholders' equity	$1,260,900	$1,241,500

Additional information for 2024:

Net income is $128,400.
Sales on account are $1,702,000. (All sales are credit sales.)
Cost of goods sold is $1,276,500.

Required:
1. Calculate the following profitability ratios for 2024:
2. When we compare two companies, can one have a higher return on assets while the other has a higher return on equity?