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Calculate the five profitability ratios listed above for adrian express

23/10/2021 Client: muhammad11 Deadline: 2 Day

Exercise 12-5 Evaluate risk ratios [LO3]

The 2012 income statement of Adrian Express reports sales of $16 million, cost of goods sold of $9.6 million, and net income of $1.6 million. Balance sheet information is provided in the following table. All amounts are in thousands.

ADRIAN EXPRESS Balance Sheets December 31, 2012 and 2011

($ in 000s)

2012

2011

Assets

Current assets:

Cash

$

600

$

760

Accounts receivable

1,400

1,000

Inventory

1,800

1,400

Long-term assets

4,800

4,240

Total assets

$

8,600

$

7,400

Liabilities and Stockholders' Equity

Current liabilities

$

2,020

$

1,660

Long-term liabilities

2,300

2,400

Common stock

2,000

2,000

Retained earnings

2,280

1,340

Total liabilities and stockholders' equity

$

8,600

$

7,400

Industry averages for the following four risk ratios are as follows:

Average collection period

25 days

Average days in inventory

60 days

Current ratio

2 to 1

Debt to equity ratio

50%

Required:

1.

Calculate the four risk ratios listed above for Adrian Express in 2012. (Use 365 days in a year. Round your answers to 1 decimal place. Omit the "%" sign in your response.)

Risk Ratios

Average collection period

days

Average days in inventory

days

Current ratio

to 1

Debt to equity ratio

%

2.

Do you think the company is more risky or less risky than the industry averages?

The 2012 income statement of Adrian Express reports sales of $16 million, cost of goods sold of $9.6 million, and net income of $1.6 million. Balance sheet information is provided in the following table. All amounts are in thousands.

ADRIAN EXPRESS Balance Sheet December 31, 2012 and 2011

($ in 000s)

2012

2011

Assets

Current assets:

Cash

$

600

$

760

Accounts receivable

1,400

1,000

Inventory

1,800

1,400

Long-term assets

4,800

4,240

Total assets

$

8,600

$

7,400

Liabilities and Stockholders' Equity

Current liabilities

$

2,020

$

1,660

Long-term liabilities

2,300

2,400

Common stock

2,000

2,000

Retained earnings

2,280

1,340

Total liabilities and stockholders' equity

$

8,600

$

7,400

Industry averages for the following four risk ratios are as follows:

Gross profit ratio

45

%

Return on assets

25

%

Profit margin

15

%

Asset turnover

2.5

times

Return on equity

35

%

Required:

1.

Calculate the five profitability ratios listed above for Adrian Express. (Round your answers to the nearest whole number. Omit the "%" sign in your response.)

Profitability Ratios

Gross profit ratio

%

Return on assets

%

Profit margin

%

Asset turnover

times

Return on equity

%

2.

Do you think the company is more profitable or less profitable than the industry averages?

The balance sheet for Plasma Screens Corporation and additional information are provided below.

PLASMA SCREENS CORPORATION Balance Sheet December 31, 2012 and 2011

2012

2011

Assets

Current assets:

Cash

$

112,000

$

120,000

Accounts receivable

78,000

92,000

Inventory

95,000

80,000

Investments

4,000

2,000

Long-term assets:

Land

480,000

480,000

Equipment

90,000

670,000

Less: Accumulated depreciation

(428,000)

(268,000)

Total assets

$

1,131,000

$

1,176,000

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

99,000

$

85,000

Interest payable

6,000

12,000

Income tax payable

8,000

5,000

Long-term liabilities:

Notes payable

100,000

200,000

Stockholders' equity:

Common stock

700,000

700,000

Retained earnings

218,000

174,000

Total liabilities and stockholders' equity

$

1,131,000

$

1,176,000

Additional information for 2012:

1.

Net income is $69,000.

2.

Sales on account are $1,520,000.

3.

Cost of goods sold is $1,160,000.

references

Section Break

Exercise 12-7 Calculate risk ratios [LO3]

3.

value: 2.00 points

Exercise 12-7 Part 1

Required:

1.

Calculate the following risk ratios for 2012 (Round your answers to 1 decimal place. Omit the "%" sign in your response):

Risk Ratios

a.

Receivables turnover ratio

times

b.

Inventory turnover ratio

times

c.

Current ratio

to 1

d.

Acid-test ratio

to 1

e.

Debt to equity ratio

%

check my work eBook Link View Hint #1 references

Worksheet

Difficulty: Hard

Exercise 12-7 Part 1

Learning Objective: 12-03 Use ratios to analyze a company’s risk.

4.

value: 1.00 points

Exercise 12-7 Part 2

2.

When we compare two companies, can one have a higher current ratio while the other has a higher acid-test ratio?

Yes

No

Exercise 12-9 Calculate profitability ratios [LO4]

[The following information applies to the questions displayed below.]

The following condensed information is reported by Sporting Collectibles.

2013

2012

Income Statement Information

Sales revenue

$

10,400,000

$

8,400,000

Cost of goods sold

6,800,000

5,900,000

Net income

360,000

248,000

Balance Sheet Information

Current assets

$

1,600,000

$

1,500,000

Long-term assets

2,200,000

1,900,000

Total assets

$

3,800,000

$

3,400,000

Current liabilities

$

1,200,000

$

900,000

Long-term liabilities

1,500,000

1,500,000

Common stock

800,000

800,000

Retained earnings

300,000

200,000

Total liabilities and stockholders' equity

$

3,800,000

$

3,400,000

references

Section Break

Exercise 12-9 Calculate profitability ratios [LO4]

5.

value: 2.00 points

Exercise 12-9 Part 1

Required:

1.

Calculate the following profitability ratios for 2013 (Round your answers to 1 decimal place. Omit the "%" sign in your response):

Profitability Ratios

a.

Gross profit ratio

%

b.

Return on assets

%

c.

Profit margin

%

d.

Asset turnover

times

e.

Return on equity

%

check my work eBook Link View Hint #1 references

Worksheet

Difficulty: Hard

Exercise 12-9 Part 1

Learning Objective: 12-04 Use ratios to analyze a companys profitability.

6.

value: 1.00 points

Exercise 12-9 Part 2

2.

Determine the amount of dividends paid to shareholders in 2013. (Omit the "$" sign in your response.)

The amount of dividends paid

$

check my work eBook Link View Hint #1 references

Worksheet

Difficulty: Hard

Exercise 12-9 Part 2

Learning Objective: 12-04 Use ratios to analyze a companys profitability.

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