Please find Acid Test Ratio, Debt to Equity Ratio, and Return on Equity! Thank y
ID: 2802508 • Letter: P
Question
Please find Acid Test Ratio, Debt to Equity Ratio, and Return on Equity! Thank you in advance!
incorme Statement For the Year Ended December 31, 2020 Revenues Service revenue (clinic, racing, TEAM) $541,000 116,000 Sales revenue (MU watches) Total revenues $657,000 Expenses Cost of goods sold (MU watches) Operating expenses Depreciation expense Interest expense Income tax expense 69,000 304,176 49,000 29,624 56,400 Total expenses 508,200 Net income $148,800 GREAT ADVENTURES, INC. Balance Sheets December 31, 2020 and 2019 Increase (1) or Decrease (D) 2020 2019 Assets Current assets: Cash Accounts receivable Inventory Other current assets $ 248,618 $137,000 111,618 () 34,000 9,500 (I) 13,900 2,950 (I) 0,900 1,950 (I) 43,500 16,850 12,850 Long-term assets: Land 350,000 0 350,000 () Buildings 1,200,000 o 1,200,000 64,000 (74,000) 25,000) 49,000 (I) 64,000 Equipment Less: Accumulated depreciation Total assets $ 1,861,818 $ 234,800 Liabilities and Stockholders' Equity Current liabilities Accounts payable Interest payable Income tax payable $11,850 $8,900 2,950 () 37,500 18,900 (I) 481,868 29,500 452,368 () 740 56,400 740 Long-term liabilities Notes payable Stockholders' equity: Common stock Paid-in capital Retained earnings Treasury stock 1,105,500 152,460 (77,000) 130,000 30,000 100,000 () 0 1105,500 () 128,160 24,300 (V) 0 (77,000) () Total liabilities and stockholders $ 1,861,818 $ 234,800 equityExplanation / Answer
Acid test ratio = (Current assets - inventory ) / Current liabilities
= ($321818 - $16850) / $68990
= 4.42 times
Debt to equity ratio = Total liabilities / Total equity
= $550858 / $1310960
= 0.42 or 42%.
Return on equity = Net income / Average shareholders equity
= $148800 / ($1310960 + $158160) / 2
= 20.26%.