Final answer:
The gross profit margin and inventory turnover ratio can be calculated using the provided data, with a gross profit margin of 55.88% and an inventory turnover of 8.57 times per year. The current ratio and return on equity cannot be computed without additional information. The firm's accounting profit in the self-check question is $50,000.
Step-by-step explanation:
Business Financial Ratios and Profit Analysis
To address the student's questions, we should calculate the following ratios and profit analysis:
- Current Ratio: This measures a company's ability to pay short-term obligations. It's calculated by dividing current assets by current liabilities. However, in the provided data, current liabilities are not mentioned; thus, we cannot calculate the current ratio without them.
- Gross Profit Margin: This indicates the percentage of revenue that exceeds the cost of goods sold (COGS). It is computed as (Revenue - COGS) / Revenue. Using the data provided: ($68 million - $30 million) / $68 million = 55.88%.
- Return on Equity (ROE): This measures profitability relative to shareholder's equity. Like the current ratio, without the equity figure, we cannot compute the ROE.
- Inventory Turnover Ratio: This assesses how many times a company's inventory is sold and replaced over a period. It is the COGS divided by average inventory. Using the data provided: $30 million / $3.5 million = approximately 8.57 times per year.
For the self-check question, the firm's accounting profit is calculated by subtracting the total explicit costs from the total revenues. The calculation is $1,000,000 (revenue) - ($600,000 (labor) + $150,000 (capital) + $200,000 (materials)) = $50,000.