Question
The 2024 income statement of Adrian Express reports sales of $15,960,000, cost of goods sold of $9,600,000, and net income of $1,600,000. Balance sheet information
The 2024 income statement of Adrian Express reports sales of $15,960,000, cost of goods sold of $9,600,000, and net income of $1,600,000. Balance sheet information is provided in the following table.
| ADRIAN EXPRESS | ||
|---|---|---|
| Balance Sheets | ||
| December 31, 2024 and 2023 | ||
| 2024 | 2023 | |
| Assets | ||
| Current assets: | ||
| Cash | $600,000 | $760,000 |
| Accounts receivable | 1,400,000 | 1,000,000 |
| Inventory | 1,800,000 | 1,400,000 |
| Long-term assets | 4,800,000 | 4,240,000 |
| Total assets | $8,600,000 | $7,400,000 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities | $2,020,000 | $1,660,000 |
| Long-term liabilities | 2,300,000 | 2,400,000 |
| Common stock | 2,000,000 | 2,000,000 |
| Retained earnings | 2,280,000 | 1,340,000 |
| Total liabilities and stockholders' equity | $8,600,000 | $7,400,000 |
Industry averages for the following four risk ratios are as follows:
| Average collection period | 25 days |
|---|---|
| Average days in inventory | 60 days |
| Current ratio | 2 to 1 |
| Debt to equity ratio | 50% |
Required: 1. Calculate the four risk ratios listed above for Adrian Express in 2024. 2. Do you think the company is more risky or less risky than the industry average?
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Advanced Management Accounting
Authors: Robert S. Kaplan, Anthony A. Atkinson, Kaplan And Atkinson
3rd Edition
0132622882, 978-0132622882
