Question

The balance sheets for Plasma Screens Corporation and additional information are provided below. PLASMA SCREENS CORPORATION Balance Sheets December 31, 2021 and 2020 2021 2020 Assets Current assets: Cash $ 158,800 $ 123,000 Accounts receivable 84,000 95,000 Inventory 98,000 83,000 Investments 4,300 2,300 Long-term assets: Land 510,000 510,000 Equipment 820,000 700,000 Less: Accumulated depreciation (458,000 ) (298,000 ) Total assets $ 1,217,100 $ 1,215,300 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 102,000 $ 88,000 Interest payable 7,500 12,300 Income tax payable 9,500 5,300 Long-term liabilities: Notes payable 100,000 200,000 Stockholders' equity: Common stock 730,000 730,000 Retained earnings 268,100 179,700 Total liabilities and stockholders' equity $ 1,217,100 $ 1,215,300 Additional information for 2021: Net income is $88,400. Sales on account are $1,628,900. Cost of goods sold is $1,230,800. Required: 1. Calculate the following risk ratios for 2021: (Round your answers to 1 decimal place.)

Answer 1

Missing word: "a. Receivables turnover ratio b. Inventory turnover ratio c. Current ratio d. Acid-test ratio d. Debt-equity ratio"

a. Receivable turover ratio = Net credit sales/ Average receivbles

= $1,628,900/ (($84000+$95000)/2)

= $1,628,900 / $89,500

= 18.2 Times

b) Inventory Turnover ratio = Cost of goods sold / Average inventory

= $1,230,800/ (($98,000+$83,000)/2)

= $1,230,800/$90,500

= 13.6 Times

c) Current ratio = Current assets / Current liabilities

= ($158,000+$84,000+$98,000+$4,300) / ($102,000+$7,500+$9,500

= $344,300/$119,000

= 2.893277311

= 2.89 to 1

d) Acid test ratio = ( Current assets - Inventory ) / Current liabilities

= ($344,300 - $98,000) / $119,000

= $246,300 / $119,000

= 2.0697478992

= 2.07

e) Debt-equity ratio = Total Liability (Current + Non-current) / Stockholders' equity

= ($119,000+$100,000) / ($730,000+$268,100)

= $219,000 / $998,100

= 0.2194169

= 22%