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Explain. PROBLEM 14.8A Ratios; Consider Advisability of Incurring Long-Term Debt LO14-5, LO14-7 ...

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Accounting

Explain.
PROBLEM 14.8A Ratios; Consider Advisability of Incurring Long-Term Debt LO14-5, LO14-7
At the end of the year, the following information was obtained from the accounting records of Harrison Electronics, Inc.:
Sales (all on credit)
$2,750,000
1,781,000
375,000
282,000
45,000
84,000
159,000
1,800,000
895,000
Instructions
a. From the information given, compute the following:
Inventory turnover
Accounts receivable turnover
Total operating expenses
Gross profit percent
Return on average stockholders' equity
Return on average Tassets
b. Harrison Electronics has an opportunity to obtain a long-term loan at an annual interest rate of 10 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.
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