Profitability Measures
Shown Below Is a Recent Income Statement for B-D

Profitability measures
Shown below is a recent income statement for B-D Electric.
$\begin{array}{c}\text { B-D ELECTRIC}\\\text { Income Statement}\\\text { For the Year Ended January 31,2010}\\\begin{array}{|l|r|r|r|}\hline \text { Sales } & & & \$ 7,500,000 \\\hline \text { Less: Cost of goods sold } & & & \underline{4,100,000} \\\hline \text { Gross profit } & & & \$ 3,400,000 \\\hline \text { Interest expense } & & & 1,975,000 \\\hline \text { Profit before income taxes } & & & \$ 1,425,000 \\\hline \text { Less: Non-operating expenses: } & & & \\\hline \text { Interest expense } & \$ 175,000 \\\hline \text { Income taxes expense } &280,000 & & 455,000\\\hline\text { Profit }&&&\$970,000\\\hline\end{array}\end{array}$ Assume that comparative balance sheets for B-D Electric indicate average total assets for the year of $2,500,000, and average total equity of $2,050,000. Compute the following:
(a) Gross profit rate. $\underline{\quad\quad}$ %
(b) Profit as a percentage of sales $\underline{\quad\quad}$ %
(c) Return on assets $\underline{\quad\quad}$ %
(d) Return on equity $\underline{\quad\quad}$ % $$\begin{array} { | l | l | l | } \hline \text { (a) } & \text { Gross profit rate: } & \mathbf { 4 5 \% } \\\hline & ( \$ 3,400,000 \div \$ 7,500,000 ) & \\\hline \text { (b) } & \begin{array} { l } \text { Net income as a percentage of net } \\\text { sales: }\end{array} & \underline { 12.9 \% } \\\hline & ( \$ 970,000 \div \$ 7,500,000 ) & \\\hline \text { (c) } & \text { Return on assets } & \mathbf { 5 7 \% } \\\hline & ( \$ 1,425,000 \div \$ 2,500,000 ) & \\\hline \text { (d) } & \text { Return on equity } & \underline { 47 \% } \\\hline & ( \$ 970,000 \div \$ 2,050,000 ) & \\\hline\end{array}$$