70.2K

Verified Solution

Link Copied!

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

Problem 12-6B Use ratios to analyze risk and profitability (L012-3, 12-4) (The following information applies to the questions displayed below.) Income statement and balance sheet data for The Athletic Attic are provided below. THE ATHLETIC ATTIC Income Statements For the years ended December 31 2022 Net sales $12,500,000 Cost of goods sold 8,150,000 Gross profit 4,350,000 Expenses: Operating expenses 1,750,000 Depreciation expense 200,000 Interest expense 55,000 Income tax expense 580,000 Total expenses 2,585,000 Net income $ 1,765,000 2021 $11,050,000 6,900,000 4,150,000 1,700,000 200,000 55,000 500,000 2,455,000 $ 1,695,000 THE ATHLETIC ATTIC Balance Sheets December 31 2022 2021 2020 $ 240,000 1,005,000 1,740,000 145,000 $ 170,000 755,000 1,370,000 115,000 $ 234,000 775,000 1,040,000 90,000 1,700,000 (750,000) $4,080,000 1,700,000 (550,000) $3,560,000 1,700,000 (350,000) $3,489,000 Assets Current assets: Cash Accounts receivable Inventory Supplies Long-term assets: Equipment Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity $ 218,500 5,500 55,000 $ 151,000 0 50,000 $ 139,500 5,500 45,000 650,000 650,000 650,000 750,000 2,401,000 $4,080,000 750,000 1,959,000 $3,560,000 750,000 1,899,000 $3,489,000 Problem 12-6B Part 1 Required: 1. Calculate the following risk ratios for 2021 and 2022: (Round your answers to 1 decimal place.) 2022 times 2021 times times to 1 % Receivables turnover ratio Inventory turnover ratio Current ratio Debt to equity ratio times to 1 % Problem 12-6B Part 2 2. Calculate the following profitability ratios for 2021 and 2022: (Round your answers to 1 decimal place.) 2021 2022 % % % % Gross profit ratio Return on assets Profit margin Asset turnover % % times times

Answer & Explanation Solved by verified expert

See Answer