The 2021 income statement of Adrian Express reports sales of $14,097,000, cost of goods sold of $8,154,000, and net income of $1,540,000. Balance sheet information is provided in the following table. ADRIAN EXPRESSBalance SheetsDecember 31, 2021 and 2020 2021 2020 Assets Current assets: Cash$540,000 $700,000 Accounts receivable 1,280,000 940,000 Inventory 1,680,000 1,340,000 Long-term assets 4,740,000 4,180,000 Total assets$8,240,000 $7,160,000 Liabilities and Stockholders' Equity Current liabilities$1,960,000 $1,600,000 Long-term liabilities 2,240,000 2,340,000 Common stock 1,880,000 1,880,000 Retained earnings 2,160,000 1,340,000 Total liabilities and stockholders' equity$8,240,000 $7,160,000 Industry averages for the following four risk ratios are as follows: Average collection period25 daysAverage days in inventory60 daysCurrent ratio2 to 1Debt to equity ratio50% Required:1. Calculate the four risk ratios listed above for Adrian Express in 2021. (Use 365 days in a year. Round your answers to 1 decimal place.) 2. Do you think the company is more risky or less risky than the industry average?multiple choiceMore riskyLess risky

The calculation of average collection period, average days in inventory, current ratio and debt to…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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The 2021 income statement of Adrian Express reports sales of $14,097,000, cost of goods sold of $8,154,000, and net income of $1,540,000. Balance sheet information is provided in the following table.

ADRIAN EXPRESS Balance Sheets December 31, 2021 and 2020
	2021		2020
Assets
Current assets:
Cash	$	540,000		$	700,000
Accounts receivable		1,280,000			940,000
Inventory		1,680,000			1,340,000
Long-term assets		4,740,000			4,180,000
Total assets	$	8,240,000		$	7,160,000
Liabilities and Stockholders' Equity
Current liabilities	$	1,960,000		$	1,600,000
Long-term liabilities		2,240,000			2,340,000
Common stock		1,880,000			1,880,000
Retained earnings		2,160,000			1,340,000
Total liabilities and stockholders' equity	$	8,240,000		$	7,160,000

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 2021. (Use 365 days in a year. Round your answers to 1 decimal place.)

2. Do you think the company is more risky or less risky than the industry average?

multiple choice

More risky
Less risky

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