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

Required:
1. Calculate the following profitability ratios for 2012:
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.

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PLASMA SCREENS CORPORATION Balance Sheet December 31, 2012 and 2011 2012 2011 Assets Current assets: Cash Accounts receivable Inventory Investments $ 112,000 78,000 95,000 4,000 $ 120,000 92,000 80,000 2,000 Long-term assets: Land Equipment Less: Accumulated depreciation 480,000 790,000 (428,000) $1,131,000 480,000 670,000 (268,000) $1,176,000 Total assets Liabilities and Stockholders' Equit Current liabilities: Accounts payable Interest payable $ 99,000 6,000 8,000 $ 85,000 12,000 5,000 Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock 100,000 200,000 700,000 218,000 $1,131,000 700,000 174,000 $1,176,000 Retained earnings Total liabilities and stockholders' equity