At the end of the year, the following information was obtained from the accounting records of Zachery, Inc.

Instructions
a. From the information given, compute the following:
1. Inventory turnover.
2. Accounts receivable turnover.
3. Total operating expenses.
4. Gross profit percentage.
5. Return on average stockholders' equity.
6. Return on average assets.

b. Zachery has an opportunity to obtain a long-term loan at an annual interest rate of 12 percent and could use this additional capital at the same rate of profitability as indicated by the given data. Would obtaining the loan be desirable from the viewpoint of the stockholders? Explain.

Transcribed Image Text:

Sales (all on credit). Cost of goods sold Average inventory... Average accounts receivable.. Interest expense. $2,750,000 1,755,000 375,000 290,000 45,000 Income tax expense 84,000 Net income. 159,000 Average investment in assets 1,800,000 Average stockholders' equity 895,000