PA13-2 Analyzing Comparative Financial Statements Using Selected Ratios [LO4, LO5]

The comparative financial statements prepared at December 31, 2017, for Pinnacle Plus showed the following summarized data:

	2017			2016
Income Statement
Sales Revenue*	$	129,000		$	118,000
Cost of Goods Sold		59,600			55,600
Gross Profit		69,400			62,400
Operating Expenses		41,700			38,700
Interest Expense		3,100			3,100
Income before Income Tax Expense		24,600			20,600
Income Tax Expense (30%)		7,380			6,180
Net Income	$	17,220		$	14,420
Balance Sheet
Cash	$	49,537		$	16,990
Accounts Receivable, Net		28,000			41,500
Inventory		34,500			29,000
Property and equipment, Net		77,000			87,000
Total Assets	$	189,037		$	174,490
Accounts Payable	$	26,507		$	23,980
Income Tax Payable		910			410
Note Payable, Long-Term		31,000			31,000
Total Liabilities		58,417			55,390
Contributed Capital (9,250 shares)		92,500			92,500
Retained Earnings		38,120			26,600
Total Liabilities and Shareholders' Equity	$	189,037		$	174,490

4.a. Shareholders' equity totalled $100,000 at the end of 2015. Compute the return on equity (ROE) ratios for 2017 and 2016. (Round your answers to 1 decimal place.)

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Return on Equity 2017 0 2016