The balance sheets for Plasma Screens Corporation and additional information are provided below. Required: 1. Calculate the
Question:
The balance sheets for Plasma Screens Corporation and additional information are provided below.
Required:
1. Calculate the following risk ratios for 2024:
a. Receivables turnover ratio.
b. Inventory turnover ratio.
c. Current ratio.
d. Acid-test ratio.
e. Debt to equity ratio.
2. When we compare two companies, can one have a higher current ratio while the other has a higher acid-test ratio? Explain your answer.
Assets Current assets: Cash Accounts receivable Inventory Investments Long-term assets: Land PLASMA SCREENS CORPORATION Balance Sheets December 31, 2024 and 2023 Equipment Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity 2024 $ 242,000 98,000 105,000 5,000 580,000 890,000 (528,000) $1,392,000 $ 109,000 7,000 9,000 110,000 800,000 357,000 $1,392,000 2023 $ 130,000 102,000 90,000 3,000 580,000 770,000 (368,000) $1,307,000 $ 95,000 13,000 6,000 220,000 800,000 173,000 $1,307,000
Step by Step Answer:
Risk ratios for 2024a Receivables turnover ratio Net Credit Sales Average Accounts ReceivableNet Cre...View the full answer
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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