Problem 12-6A Use ratios to analyze risk and profitability (LO12-3, 12-4)

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Income statements and balance sheets data for Virtual Gaming Systems are provided below.

VIRTUAL GAMING SYSTEMS Income Statements For the year ended December 31
	2019	2018
Net sales	$3,505,000	$3,031,000
Cost of goods sold	2,479,000	1,949,000
Gross profit	1,026,000	1,082,000
Expenses:
Operating expenses	954,000	857,000
Depreciation expense	29,000	26,500
Loss on sale of land	0	7,900
Interest expense	17,500	14,500
Income tax expense	7,900	47,500
Total expenses	1,008,400	953,400
Net income	$ 17,600	$ 128,600

VIRTUAL GAMING SYSTEMS Balance Sheets December 31
	2019	2018	2017
Assets
Current assets:
Cash	$ 200,500	$185,000	$143,000
Accounts receivable	74,500	80,000	59,000
Inventory	124,500	104,000	134,000
Prepaid rent	13,900	11,900	5,880
Long-term assets:
Investment in bonds	104,000	104,000	0
Land	299,000	209,000	239,000
Equipment	299,000	269,000	209,000
Less: Accumulated depreciation	(96,500)	(67,500)	(41,000)
Total assets	$1,018,900	$895,400	$748,880
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 193,200	$ 65,000	$110,580
Interest payable	8,700	5,800	2,900
Income tax payable	11,900	14,500	13,900
Long-term liabilities:
Notes payable	390,000	284,000	224,000
Stockholders' equity:
Common stock	299,000	299,000	299,000
Retained earnings	116,100	227,100	98,500
Total liabilities and stockholders equity	$1,018,900	$895,400	$748,880

VIRTUAL GAMING SYSTEMS Income Statements For the year ended December 31
	2019	2018
Net sales	$3,540,000	$3,066,000
Cost of goods sold	2,486,000	1,956,000
Gross profit	1,054,000	1,110,000
Expenses:
Operating expenses	961,000	864,000
Depreciation expense	36,000	30,000
Loss on sale of land	0	8,600
Interest expense	21,000	18,000
Income tax expense	8,600	51,000
Total expenses	1,026,600	971,600
Net income	$ 27,400	$ 138,400

VIRTUAL GAMING SYSTEMS Balance Sheets December 31
	2019	2018	2017
Assets
Current assets:
Cash	$ 210,000	$192,000	$150,000
Accounts receivable	84,000	87,000	66,000
Inventory	134,000	111,000	141,000
Prepaid rent	14,600	12,600	6,720
Long-term assets:
Investment in bonds	111,000	111,000	0
Land	306,000	216,000	246,000
Equipment	306,000	276,000	216,000
Less: Accumulated depreciation	(114,000)	(78,000)	(48,000)
Total assets	$1,051,600	$927,600	$777,720
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 139,800	$ 72,000	$127,520
Interest payable	10,800	7,200	3,600
Income tax payable	12,600	18,000	14,600
Long-term liabilities:
Notes payable	460,000	291,000	231,000
Stockholders' equity:
Common stock	306,000	306,000	306,000
Retained earnings	122,400	233,400	95,000
Total liabilities and stockholders equity	$1,051,600	$927,600	$777,720

Problem 12-6A Part 1 Required: 1. Calculate the following risk ratios for 2018 and 2019: (Round your answers to 1 decimal place.) Receivables turnover ratio Inventory turnover ratio Current ratio Debt to equity ratio 2018 43.6 times 16.4 times 2019 45.4 times 21.7|times to 1 to 1