Final Eoin otosGoogle Photos Richards & James is a multinational corporation tha

Question

Final Eoin otosGoogle Photos Richards & James is a multinational corporation that manufactures and markets many household producas. Last year, sales for the company were 876478 (all amounts in milions). The annual report did not disclose the amount of credit sales, so we will assume that 80 percent of sales were on credit. The average groBS profit on sales was 47 percent. Additional account balances were: Accounts receivable (net) Inventory Ending Beginning $6,630 IN S5,731 6,822 6,295 Required: 1. Compute Richards & James receivable turnover ratio and its inventory tumover ratio. (Round decimal places.) your final answers to 2 atlans to the nearest Tumover Accounts receivable Inventory dimal places) 2. How many days does it take for the Company to collect its accounts receivable and sell its inventory. Usa 365 days INA yeard Ro Days Accounts receivable Inventory

Explanation / Answer

(1) Cost of goods sold ($ Million) = Sales x (1 - Gross profit margin) = 76,478 x (1 - 0.47) = 76,478 x 0.53 = 40,533

(a) Receivable turnover = Net sales / Average receivables = $76,478 million / [$(6,630 + 5,731) million / 2]

= 76,478 / (12,361 / 2) = 12.37

(b) Inventory turnover = Cost of goods sold / Average inventory = $40,533 million / [$(6,822 + 6,295) million / 2]

= 40,533 / (13,117 / 2) = 6.18

(2)

(a) Days in accounts receivables = 365 / Receivables turnover = 365 / 12.37 = 29.51

(b) Days in inventory = 365 / Inventory turnover = 365 / 6.18 = 59.06

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