Question

The 2018 income statement of Adrian Express reports sales of $14,400,000, cost of goods sold of $8,387,500, and ret income of $1,550,000. Balance shoet infomation is provided in the following table ADRIAN EXPRESS Balance Sheets December 31 2018 and 2017 2018 2017 Assets Current assets Cash Accounts receivable Inventory Long-torm assets $ 550,000 1,300,000 1,700,000 4,750,000 S 710,000 950,000 1350,000 4.190.000 Total assets $8300,000 $7200,000 Labilicies and Stockholders Cument liabil0es Long-ens abiises Equity $1,970,000 2.250.000 1900.000 2.180,000 $1,610,000 2350.000 1900000 1340000 Common stock Retained eamings Total labtes and stockholders equty s8,300,000 $7,200,000 Industry averages for the following four risk ratios are as follows Average colecton period Average days in imventory Curent ratio Debt to equity rato 25 days 60 days 2 o 50%

Answer 1

Solution Avarage Collection periodu 365 Debtors turnover rato Debtors turnoven ratio & Credit Sales Avaroge accounts receivable $ ry UD0 000 - 13ooooo + 950000 12.8 times then Avarage collection period 365 12.8 28.5 = days. Avorage days in inventory = 365 Inventory turnover. ratio Tnventory cost of goods sold turnover ratio Avarage inventory. 8387500 1700 000 + 1350000

inventory turnover ratio: 5.5 Then. Avarage days in inventory = 365 5.5 - 66.4 days. Current ratio = current assets. current liabilities => 550 000 +1300000 +1700 000 197oooo » 1.8 to 1 Debt to earity ratio a Debt χιου Equity - Total dest Total enity 1970 000 + 2250 000 190oooo of 2180000 X100 - 103.41. More risky.