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Problem 12-6A (Algo) 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 Years Ended December 31
2025 2024
Net sales $3,525,000 $3,051,000
Cost of goods sold 2,483,000 1,953,000
Gross profit 1,042,000 1,098,000
Expenses:
Operating expenses 958,000 861,000
Depreciation expense 33,000 28,500
Loss on sale of land 0 8,300
Interest expense 19,500 16,500
Income tax expense 8,300 49,500
Total expenses 1,018,800 963,800
Net income 23,200 134,200
VIRTUAL GAMING SYSTEMS
Balance Sheets
December 31
2025 2024 2023
Assets
Current assets:
Cash $205,500 $189,000 $147,000
Accounts receivable 79,500 84,000 63,000
Inventory 129,500 108,000 138,000
Prepaid rent 14,300 12,300 6,360
Long-term assets:
Investment in bonds 108,000 108,000 0
Land 303,000 213,000 243,000
Equipment 303,000 273,000 213,000
Less: Accumulated depreciation (106,500) (73,500) (45,000)
Total assets $1,036,300 $913,800 $765,360
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $161,400 $69,000 $120,260
Interest payable 9,900 6,600 3,300
Income tax payable 12,300 16,500 14,300
Long-term liabilities:
Notes payable 430,000 288,000 228,000
Stockholders' equity:
Common stock 303,000 303,000 303,000
Retained earnings 119,700 230,700 96,500
Total liabilities and stockholders’ equity $1,036,300 $913,800 $765,360
Problem 12-6A (Algo) Part 1
Required:
1. Assuming that all sales were on account, calculate the following risk ratios for 2024 and 2025: (Round your answers to 1 decimal place.)