Income statement and balance sheet data for The Sports Shack are provided below.

The Sports Shack
Income Statements
For the years ended December 31

2019

2018

Sales revenue

$8,200,000

$6,600,000

Cost of goods sold

6,100,000

4,700,000

Gross profit

2,100,000

1,900,000

Expenses:

Operating expenses

1,450,000

1,400,000

Depreciation expense

90,000

100,000

Interest expense

25,000

50,000

Income tax expense

95,000

80,000

Total expenses

1,660,000

1,630,000

Net income

$440,000

$270,000

The Sports Shack
Balance Sheets
December 31

Assets

2019

2018

2017

Current assets:

Cash

$290,000

$218,000

$196,000

Accounts receivable

1,050,000

680,000

880,000

Inventory

919,000

1,250,000

1,100,000

Supplies

80,000

90,000

65,000

Long-term assets:

Equipment

1,100,000

1,200,000

900,000

Accumulated depreciation

(440,000)

(350,000)

(250,000)

Total assets

$2,999,000

$3,088,000

$2,891,000

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$50,000

$65,000

$55,000

Interest payable

2,000

4,000

6,000

Income tax payable

38,000

40,000

30,000

Long-term liabilities:

Notes payable

200,000

400,000

300,000

Stockholders’ equity:

Common stock

900,000

900,000

900,000

Retained earnings

1,809,000

1,679,000

1,600,000

Total liabilities and equity

$2,999,000

$3,088,000

$2,891,000

Required:

a. Calculate the following risk ratios for 2018 and 2019.

Receivables turnover ratio

Current ratio

Inventory turnover ratio

Debt to equity ratio

b. Calculate the following profitability ratios for 2018 and 2019.

Gross profit ratio

Profit margin

Return on assets

Asset turnover

c. Based on the ratios calculated, determine whether overall risk and profitability improved from 2018 to 2019.