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Income statement and also balance sheet information for Great Adendeavors, Inc., are gave listed below.

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As you have the right to tell from the financial statements, 2020 was a specifically busy year. Tony and Suzie were able to usage the $1.2 million got 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 also put in a baby pool to celebrate the birth of their firstborn child, bit Venture Mathechild.

Required:

1. Calculate the adhering to risk ratios for 2020.

a. Receivables turnover proportion. (Hint: Use complete earnings for net crmodify sales)

b. Average arsenal period.

c. Inventory turnover proportion.

d. Median days in inventory.

e. Current ratio.

f. Acid-test proportion. (Hint: There are no current investments)

g. Debt to equity ratio.

h. Times interest earned ratio.

2. Calculate the complying with profitcapability ratios for 2020.

a. Gross profit ratio (on the MU watches).

b. Return on assets.

c. Profit margin.

d. Asset turnover.

e. Return on equity.

Note: In calculating profit margin and also asset turnover, net sales need to include both business revenue and sales revenue.

3. Briefly discuss Great Adventures’ hazard and also profitcapacity in 2020.


Ratios

It is supplied to assess threat and profitcapacity of firm in the time of the year. Hence there are 2 categories of ratio which is threat proportion and also profitability proportion.

Risk Analysis purpose, tright here are eight ratios obtainable. Out of which six are liquidity measurement ratio and also two solvency proportion. Liquidity proportion will check sufficiency of cash to pay present licapacity. This is possible through considering existing assets and existing liability and also for solvency ratio, long term licapacity additionally considered.


1.

Following are the hazard proportion calculation in the books of G for the year finished December 31 2020.

a.

Receivable turnover proportion shows the variety of times agency is able to collect its receivables during the duration. Low ratio suggests troubles of accounting receivables. High turnover receivables proportion suggests great picture of receivables.

To uncover receivable ratio, net credit sales would be separated by average account receivables. Average account receivables will certainly be found out by summation of opening and closing balance of account receivable separated by 2. Following is the calculation of receivable proportion for the year 2020:

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A has actually net credit sales of $661,000 for the year 2020. Median account receivable concerns $40,000 for this reason account receivable concerns 16.53 times. This mirrors better ratio.


b.

Median Collection period: Receivable turnover ratio have the right to be converted right into days which called average arsenal period. Ratio comes shorter is better for company. To discover this ratio, 365 days need to be split by receivable turnover ratio. Calculation for the exact same is as under for the year 2020.

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Receivable turnover ratio is 16.53 times which should be converted right into days. Hence average repertoire period involves 22 days which is normal.


c.

Inventory turnover ratio present variety of times agency sales its inventory in the time of the period. High turnover ratio appears positive influence and also low proportion seems negative proportion. Very high turnover proportion is gives alert signal to company.

To uncover inventory ratio, price of goods offered would certainly be separated by average inventory. Mean inventory would be obtained by summation of opening balance of inventory and also closing balance of inventory split by 2. Following is the inventory turnover proportion for the year 2020.

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Cost of products offered for the year 2020 is $70,000 and average inventory for the year 2020 is $15,500 thus inventory proportion is 4.52 times. This reflects positive influence.