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SECURE LIFE, INC. Income Statement For the Year Ended December 31,2021 Sales Revenue $ 6,750,000 Cost of Goods Sold 3,200,000 Gross Profit 3,550,000 Operating Expenses 1,525,000 Operating Income 2,025,000 Other Expenses: Interest Expense (17,000) Income Before Income Tax Expense 2,008,000 Income Tax Expense (702,800) Net Income $ 1,305,200 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.

SECURE LIFE, INC. Income Statement For the Year Ended December 31,2021 Sales Revenue $ 6,750,000 Cost of Goods Sold 3,200,000 Gross Profit 3,550,000 Operating Expenses 1,525,000 Operating Income 2,025,000 Other Expenses: Interest Expense (17,000) Income Before Income Tax Expense 2,008,000 Income Tax Expense (702,800) Net Income $ 1,305,200 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.

FINANCIAL ACCOUNTING
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 Secure Life, Inc. The company's target rate of return is 12%. SECURE LIFE, INC. Comparative Balance Sheet As of December 31, 2021, and 2020 2021 2020 Assets Cash $ 82,000 $ 50,000 Accounts Receivable 54,000 20,500 Supplies 1,000 500 Property, Plant, and Equipment, net 275,000 180,000 Patents, net 138,000 99,000 Total Assets $ 550,000 $ 350,000 Liabilities and Stockholders' Equity Accounts Payable $ 40,000 $ 32,000 Short-term Notes Payable 135,000 45,000 Long-term Notes Payable 170,000 125,000 Common Stock, no Par 150,000 130,000 Retained Earnings 55,000 18,000 Total Liabilities and Stockholders' Equity $ 550,000 $ 350,000
Transcribed Image Text:Using ROI and RI to evaluate investment centers Consider the following condensed financial statements of Secure Life, Inc. The company's target rate of return is 12%. SECURE LIFE, INC. Comparative Balance Sheet As of December 31, 2021, and 2020 2021 2020 Assets Cash $ 82,000 $ 50,000 Accounts Receivable 54,000 20,500 Supplies 1,000 500 Property, Plant, and Equipment, net 275,000 180,000 Patents, net 138,000 99,000 Total Assets $ 550,000 $ 350,000 Liabilities and Stockholders' Equity Accounts Payable $ 40,000 $ 32,000 Short-term Notes Payable 135,000 45,000 Long-term Notes Payable 170,000 125,000 Common Stock, no Par 150,000 130,000 Retained Earnings 55,000 18,000 Total Liabilities and Stockholders' Equity $ 550,000 $ 350,000
SECURE LIFE, INC. Income Statement For the Year Ended December 31, 2021 Sales Revenue $ 6,750,000 Cost of Goods Sold 3,200,000 Gross Profit 3,550,000 Operating Expenses 1,525,000 Operating Income 2,025,000 Other Expenses: Interest Expense (17,000) Income Before Income Tax Expense 2,008,000 Income Tax Expense (702,800) Net Income $ 1,305,200 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.
Transcribed Image Text:SECURE LIFE, INC. Income Statement For the Year Ended December 31, 2021 Sales Revenue $ 6,750,000 Cost of Goods Sold 3,200,000 Gross Profit 3,550,000 Operating Expenses 1,525,000 Operating Income 2,025,000 Other Expenses: Interest Expense (17,000) Income Before Income Tax Expense 2,008,000 Income Tax Expense (702,800) Net Income $ 1,305,200 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.
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