Chapter 12, Problem 12.8E

Calculate profitability ratios (LO12–4)

Refer to the information provided for Plasma Screens Corporation in E12–7.

Required:

  1.    Calculate the following profitability ratios for 2018:

  a.    Gross profit ratio.

  b.    Return on assets.

  c.    Profit margin.

  d.    Asset turnover.

  e.    Return on equity.

  2.    When we compare two companies, can one have a higher return on assets while the other has a higher return on equity? Explain your answer.