Explain.

PROBLEM $14\mathrm{.}8$A Ratios; Consider Advisability of Incurring Long$-$Term Debt $$ LO$14-5,$ LO$14-7$

At the end of the year, the following information was obtained from the accounting records of Harrison Electronics, Inc.:

Sales $($all on credit$)$

$$2,750,000$

$1,781,000$

$375,000$

$282,000$

$45,000$

$84,000$

$159,000$

$1,800,000$

$895,000$

Instructions

a$.$ From the information given, compute the following:

Inventory turnover

Accounts receivable turnover

Total operating expenses

Gross profit percent

Return on average stockholders' equity

Return on average Tassets

b$.$ Harrison Electronics has an opportunity to obtain a long$-$term loan at an annual interest rate of $10$ percent and could use this additional capital at the same rate of profitability as indicated by the given data. Would obtaining the loan be desirable from the viewpoint of the stockholders? Explain.