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Problem 12-6A Use ratios to analyze risk and profitability (LO12-3, 12-4)

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Income statements and balance sheets data for Virtual Gaming Systems are provided below.

VIRTUAL GAMING SYSTEMS Income Statements For the year ended December 31
	2019	2018
Net sales	$3,505,000	$3,031,000
Cost of goods sold	2,479,000	1,949,000
Gross profit	1,026,000	1,082,000
Expenses:
Operating expenses	954,000	857,000
Depreciation expense	29,000	26,500
Loss on sale of land	0	7,900
Interest expense	17,500	14,500
Income tax expense	7,900	47,500
Total expenses	1,008,400	953,400
Net income	$ 17,600	$ 128,600

VIRTUAL GAMING SYSTEMS Balance Sheets December 31
	2019	2018	2017
Assets
Current assets:
Cash	$ 200,500	$185,000	$143,000
Accounts receivable	74,500	80,000	59,000
Inventory	124,500	104,000	134,000
Prepaid rent	13,900	11,900	5,880
Long-term assets:
Investment in bonds	104,000	104,000	0
Land	299,000	209,000	239,000
Equipment	299,000	269,000	209,000
Less: Accumulated depreciation	(96,500)	(67,500)	(41,000)
Total assets	$1,018,900	$895,400	$748,880
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$ 193,200	$ 65,000	$110,580
Interest payable	8,700	5,800	2,900
Income tax payable	11,900	14,500	13,900
Long-term liabilities:
Notes payable	390,000	284,000	224,000
Stockholders' equity:
Common stock	299,000	299,000	299,000
Retained earnings	116,100	227,100	98,500
Total liabilities and stockholders equity	$1,018,900

Problem 12-6A Part 1 Required: 1. Calculate the following risk ratios for 2018 and 2019: (Round your answers to 1 decimal place.) 2018 43.6 times 16.4 times 2019 45.4 times 21.7 times Receivables turnover ratio Inventory turnover ratio Current ratio Debt to equity ratio to 1 to 1 Problem 12-6A Part 2 2. Calculate the following profitability ratios for 2018 and 2019: (Round your answers to 1 decimal place.) 2018 2019 Gross profit ratio Return on assets Profit margin Asset turnover times imes

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