Question

The following income statement and balance sheets for The Athletic Attic are provided.

THE ATHLETIC ATTIC
Income Statement
For the year ended December 31, 2021
Net sales			$	8,770,000
Cost of goods sold				5,385,000
Gross profit				3,385,000
Expenses:
Operating expenses	$	1,535,000
Depreciation expense		197,000
Interest expense		37,000
Income tax expense		347,000
Total expenses				2,116,000
Net income			$	1,269,000

THE ATHLETIC ATTIC
Balance Sheets
December 31
		2021				2020
Assets
Current assets:
Cash	$	151,000			$	201,000
Accounts receivable		725,000				745,000
Inventory		1,340,000				1,010,000
Supplies		97,000				72,000
Long-term assets:
Equipment		1,085,000				1,085,000
Less: Accumulated depreciation		(394,000	)			(197,000	)
Total assets	$	3,004,000			$	2,916,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	102,000			$	78,000
Interest payable		0				3,700
Income tax payable		33,500				29,700
Long-term liabilities:
Notes payable		470,000				470,000
Stockholders' equity:
Common stock		570,000				570,000
Retained earnings		1,828,500				1,764,600
Total liabilities and stockholders’ equity	$	3,004,000			$	2,916,000

Required:
Assuming that all sales were on account, calculate the following risk ratios for 2021. (Use 365 days a year. Round your intermediate and final answers to 1 decimal place.)

Risk Ratios

1. Debt to equity ratio %

Answer 1

Debt to equity ratio = Total Liabilities/Total stockholders equity = (102,000+33,500+470,000)/(570,000+1,828,500) = 605,500/2,398,500 = 25.2%

I have rounded some numbers. Comment if you face any issues