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Exercise 12-5 Evaluate risk ratios [LO3] The 2012 income statement of Adrian Express reports sales of $16 million, cost of goods sold of $9.6 million, and net income of $1.6 million. Balance sheet information is provided in the following table. All amounts are in thousands. ADRIAN EXPRESS Balance Sheets December 31, 2012 and 2011 ($ in 000s) 2012 2011 Assets Current assets: Cash $ 600 $ 760 Accounts receivable 1,400 1,000 Inventory 1,800 1,400 Long-term assets 4,800 4,240 Total assets $ 8,600 $ 7,400 Liabilities and Stockholders’ Equity Current liabilities $ 2,020 $ 1,660 Long-term liabilities 2,300 2,400 Common stock 2,000 2,000 Retained earnings 2,280 1,340 Total liabilities and stockholders’ equity $ 8,600 $ 7,400 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 2012. (Use 365 days in a year. Round your answers to 1 decimal place. Omit the “%” sign in your response.) Risk Ratios Average collection period days Average days in inventory days Current ratio to 1 Debt to equity ratio % 2. Do you think the company is more risky or less risky than the industry averages? The 2012 income statement of Adrian Express reports sales of $16 million, cost of goods sold of $9.6 million, and net income of $1.6 million. Balance sheet information is provided in the following table. All amounts are in thousands. ADRIAN EXPRESS Balance Sheet December 31, 2012 and 2011 ($ in 000s) 2012 2011 Assets Current assets: Cash $ 600 $ 760 Accounts receivable 1,400…
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financialstat….docx