Refer to the information for Adrian Express in E12–5. Industry averages for the following profitability ratios are as follows:

Gross profit ratio ..........45%

Return on assets ...........25%

Profit margin ...........15%

Asset turnover...........2.5 times

Return on equity ..........35%

In E12–5, The 2015 income statement of Adrian Express reports sales of $19,310,000, cost of goods sold of $12,250,000, and net income of $1,700,000. Balance sheet information is provided in the following table.

Required:

1. Calculate the five profitability ratios listed above for Adrian Express.

2. Do you think the company is more profitable or less profitable than the industry average? Explain your answer.

Transcribed Image Text:

ADRIAN EXPRESS Balance Sheets December 31, 2015 and 2014 2015 2014 Assets Current assets: $ 700,000 $ 860,000 Cash Accounts receivable 1,600,000 2,000,000 4,900,000 $9,200,000 1,100,000 1,500,000 4,340,000 $7,800,000 Inventory Long-term assets Total assets Liabilities and Stockholders' Equity $1,920,000 2,400,000 1,900,000 2,980,000 $9,200,000 $1,760,000 2,500,000 1,900,000 1,640,000 $7,800,000 Current liabilities Long-term liabilities Common stock Retained earnings Total liabilities and stockholders' equity