Income statement and balance sheet data for Virtual Gaming Systems are provided below. Required: 1. Calculate the
Question:
Income statement and balance sheet data for Virtual Gaming Systems are provided below.
Required:
1. Calculate the following risk ratios for 2024 and 2025:
a. Receivables turnover ratio.
b. Inventory turnover ratio.
c. Current ratio.
d. Debt to equity ratio.
2. Calculate the following profitability ratios for 2024 and 2025:
a. Gross profit ratio.
b. Return on assets.
c. Profit margin.
d. Asset turnover.
3. Based on the ratios calculated, determine whether overall risk and profitability improved from 2024 to 2025.
VIRTUAL GAMING SYSTEMS Income Statements For the years ended December 31 Net sales Cost of goods sold Gross profit Expenses: Operating expenses Depreciation expense Loss on sale of land Interest expense Income tax expense Total expenses Net income 2025 $3,560,000 2,490,000 1,070,000 965,000 40,000 O 23,000 9,000 1,037,000 $ 33,000 2024 $3,086,000 1,960,000 1,126,000 868,000 32,000 9,000 20,000 58,000 987,000 $ 139,000
Step by Step Answer:
There are formulas in computing for the ratios Let us go through them one by one 1 RISK RATIOS a Rec...View the full answer
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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