The 2018 income statement of Adrian Express reports sales of $19,310,000, cost of goods sold of $12,250,000, and net income of $1,700,000. Balance sheet information is provided in the following table.  

      

  

    Required: 

  

1. Calculate the four risk ratios listed above for Adrian Express in 2018.

  

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

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ADRIAN EXPRESS Balance Sheets December 31, 2018 and 2017 2018 2017 Assets Current assets: $ 700,000 $ 860,000 Cash Accounts recevable 1,600,000 1,100,000 Inventory Long-term assets 2,000,000 1,500,000 4,900,000 $9,200,000 4,340,000 Total assets $7,800,000 Llablitles and Stockholders' Equity Current llabilitles $1,920,000 $1,760,000 Long-term llabilitles 2,400,000 2,500,000 Common stock 1,900,000 1,900,000 Retalned eamings 2,980,000 $9.200,000 1,640,000 $7,800,000 Total llabilitles and stockholders' equity Industry averages for the following four risk ratios are as follows: Average collection perlod Average days In Inventory 25 days 60 days 2 to 1 Current ratio Debt to equity ratio 50% ADRIAN EXPRESS Balance Sheets December 31, 2018 and 2017 2018 2017 Assets Current assets: $ 700,000 $ 860,000 Cash Accounts recevable 1,600,000 1,100,000 Inventory Long-term assets 2,000,000 1,500,000 4,900,000 $9,200,000 4,340,000 Total assets $7,800,000 Llablitles and Stockholders' Equity Current llabilitles $1,920,000 $1,760,000 Long-term llabilitles 2,400,000 2,500,000 Common stock 1,900,000 1,900,000 Retalned eamings 2,980,000 $9.200,000 1,640,000 $7,800,000 Total llabilitles and stockholders' equity Industry averages for the following four risk ratios are as follows: Average collection perlod Average days In Inventory 25 days 60 days 2 to 1 Current ratio Debt to equity ratio 50%

Answer rating: 100% (QA)

Solution 1 Compute average collection period as follows ... View the full answer