The numbers below are for Question Company and Standard Company for the year 2003:
|
Question |
Standard |
|
|
Cash . |
$00,060 |
$00,300 |
|
Accounts receivable. |
600 |
4,000 |
|
Inventory |
1,400 |
3,650 |
|
Plant and equipment |
1,000 |
8,650 |
|
Total liabilities |
$2,448 |
$13,280 |
|
Stockholders equity |
612 |
3,320 |
|
Sales |
10,000 |
50,000 |
|
Cost of goods sold. |
7,350 |
36,750 |
|
Wages expense . . |
700 |
3,500 |
|
Other expenses . . |
1,900 |
8,500 |
|
Net income |
50 |
$1,250 |
1. Compute return on equity, profit margin, asset turnover, and the assets to equity ratio for both Question and Standard.
2. Briefly explain why Question s return on equity is lower than Standard s.