Income statement and balance sheet data for Great Adventures, Inc., are provided below.

As you can tell from the financial statements, 2017 was an especially busy year. Tony and Suzie were able to use the $1.2 million received from the issuance of 100,000 shares of stock to hire a construction company for $1 million to build the cabins, dining facilities, ropes course, and the outdoor swimming pool. They even put in a baby pool to celebrate the birth of their firstborn son, little Venture Matheson.

Required:
1. Calculate the following risk ratios for 2017.
a. Receivables turnover ratio.
b. Average collection period.
c. Inventory turnover ratio.
d. Average days in inventory.
e. Current ratio.
f. Acid-test ratio.
g. Debt to equity ratio.
h. Times interest earned ratio.
2. Calculate the following profitability ratios for 2017.
a. Gross profit ratio (on the MU watches).
b. Return on assets.
c. Profit margin.
d. Asset turnover.
e. Return on equity.
3. Briefly comment on Great Adventures’ risk and profitability in2017.

Transcribed Image Text:

GREAT ADVENTURES, INC Income Statement For the year ended December 31, 2017 Revenues Service revenue (clinic, racing, TEAM) Sales revenue (MU watches) $543,000 118,000 Total revenues $661,000 Cost of goods sold (MU watches) Operating expenses 70,000 304,276 50,000 29,724 57,000 Interest expense Income tax expense Total expenses Net income GREAT ADVENTURES, INC. December 31, 2017 and 2016 Increase (l) or Decrease (D) 2017 2016 Assets Current assets Accounts receivable Inventory Other current assets 322,362 $138,000 184,362 ) 10,000 () 3,000 () 2,000 () 45,000 5,000 17,000 14,000 13,000 11,000 Long-term assets 500,000 65,000 (75,250) Buildings Equipment Less: Accumulated depreciation 0 65,000 0 500,000 () 1,000,000) 1,000,000 (25,250) $237750 50,000 m Total assets $1,887112 Liabilities and Stockholders' Equity Current liabilities Accounts payable Interest payable 12,000 9,000 3,000 750 38,000 Income tax payable 57,000 19,000 ( Long-term liabilities: Notes payable Stockholders' equity: Common stock Paid-in capital 492,362 30, 462,362 () 120,000 20,000 175,000 140,000 Total liabilities and stockholders' equity $1,887 112 S237.750 00,000 0 1,105,000 (D) 35,000 ) 0 (75,000) (0) 1,105,000 Retained earnings Treasury stock