The 2024 income statement of Adrian Express reports sales of $17,595,000, cost of goods sold of $10,887,500, and net income of $1,650,000. Balance sheet information is provided in the following table. ADRIAN EXPRESSBalance SheetsDecember 31, 2024 and 2023 20242023Assets Current assets: Cash$650,000$810,000Accounts receivable1,500,0001,050,000Inventory1,900,0001,450,000Long-term assets4,850,0004,290,000Total assets$8,900,000$7,600,000Liabilities and Stockholders' Equity Current liabilities$1,970,000$1,710,000Long-term liabilities2,350,0002,450,000Common stock1,950,0001,950,000Retained earnings2,630,0001,490,000Total liabilities and stockholders' equity$8,900,000$7,600,000Industry averages for the following four risk ratios are as follows: Average collection period25 daysAverage days in inventory60 daysCurrent ratio2 to 1Debt to equity ratio50%Required:1. Calculate the four risk ratios listed above for Adrian Express in 2024.2. Do you think the company is more risky or less risky than the industry average? Calculate the four risk ratios listed above for Adrian Express in 2024. (Use 365 days in a year. Round your answers to 1decimal place. Do not round your intermediate calculations.)Risk RatiosAverage collection periodAverage days in inventoryCurrent ratioDebt to equity ratiodaysdays%

1. Average Collection Period:Average Collection Period = Accounts Receivable/Sales times 365 Using…

Answered: Calculate the four risk ratios listed…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The 2024 income statement of Adrian Express reports sales of $17,595,000, cost of goods sold of $10,887,500, and net income of $1,650,000. Balance sheet information is provided in the following table.

	2024	2023
ADRIAN EXPRESS
Balance Sheets
December 31, 2024 and 2023
Assets
Current assets:
Cash	$650,000	$810,000
Accounts receivable	1,500,000	1,050,000
Inventory	1,900,000	1,450,000
Long-term assets	4,850,000	4,290,000
Total assets	$8,900,000	$7,600,000
Liabilities and Stockholders' Equity
Current liabilities	$1,970,000	$1,710,000
Long-term liabilities	2,350,000	2,450,000
Common stock	1,950,000	1,950,000
Retained earnings	2,630,000	1,490,000
Total liabilities and stockholders' equity	$8,900,000	$7,600,000

Industry averages for the following four risk ratios are as follows:

Average collection period	25 days
Average days in inventory	60 days
Current ratio	2 to 1
Debt to equity ratio	50%

Required:
1. Calculate the four risk ratios listed above for Adrian Express in 2024.
2. Do you think the company is more risky or less risky than the industry average?