Income statement and balance sheet data for The Sports Shack are provided below.
The Spo...
Business, 21.05.2020 23:00 rlafferty5604
Income statement and balance sheet data for The Sports Shack are provided below.
The Sports Shack
Income Statements
For the years ended December 31
2019
2018
Sales revenue
$8,200,000
$6,600,000
Cost of goods sold
6,100,000
4,700,000
Gross profit
2,100,000
1,900,000
Expenses:
Operating expenses
1,450,000
1,400,000
Depreciation expense
90,000
100,000
Interest expense
25,000
50,000
Income tax expense
95,000
80,000
Total expenses
1,660,000
1,630,000
Net income
$440,000
$270,000
The Sports Shack
Balance Sheets
December 31
Assets
2019
2018
2017
Current assets:
Cash
$290,000
$218,000
$196,000
Accounts receivable
1,050,000
680,000
880,000
Inventory
919,000
1,250,000
1,100,000
Supplies
80,000
90,000
65,000
Long-term assets:
Equipment
1,100,000
1,200,000
900,000
Accumulated depreciation
(440,000)
(350,000)
(250,000)
Total assets
$2,999,000
$3,088,000
$2,891,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$50,000
$65,000
$55,000
Interest payable
2,000
4,000
6,000
Income tax payable
38,000
40,000
30,000
Long-term liabilities:
Notes payable
200,000
400,000
300,000
Stockholders’ equity:
Common stock
900,000
900,000
900,000
Retained earnings
1,809,000
1,679,000
1,600,000
Total liabilities and equity
$2,999,000
$3,088,000
$2,891,000
Required:
a. Calculate the following risk ratios for 2018 and 2019.
Receivables turnover ratio
Current ratio
Inventory turnover ratio
Debt to equity ratio
b. Calculate the following profitability ratios for 2018 and 2019.
Gross profit ratio
Profit margin
Return on assets
Asset turnover
c. Based on the ratios calculated, determine whether overall risk and profitability improved from 2018 to 2019.
Answers: 2
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