SHOW ALL WORK Selected balances from a company\'s financial statements are shown
ID: 2354260 • Letter: S
Question
SHOW ALL WORK
Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012:
(a) accounts receivable turnover
(b) inventory turnover
(c) days' sales uncollected
(d) days' sales in inventory
(e) profit margin.
(f) return on total assets.
Dec 31 2012 Dec 31 2011 For Yr 2012
Accounts Receivable $27,000 $24,000
Merchandise Inventory 25,000 20,000
Total Assets 296,000 244,000
Accounts Payable 26,000 32,000
Salaries Payable 3,000 4,400
Sales (ALL ON CREDIT) $312,000
Costs of Goods sold 165,000
Salaries Expense 48,000
Other expenses 75,000
Net income 24,000
Explanation / Answer
a. accounts receivable turnover = net sales/average accounts receivable = 312,000/25,500 = 12.2 times (note: average AR is beginning AR plus ending AR divided by two) b. inventory turnover = cost of goods sold/average inventory = 165,000/22,500 = 7.3 times (note: average inventory is begining inventory plus ending inventory divided by two) c. Days' sales uncollected = accounts receivable /net sales x 365 = 27,000/312,000 x 365 = 31.6 days d. days sales in inventory = ending inventory/cost of goods sold x 365 = 25,000/165,000 x 365 = 55.3 days e. profit margin = net income/net sales = 24,000/312,000 = 0.077 or 7.7% f. return on total assets = net income/average total assets = 24,000/270,000 = 0.089 or 8.9% (note average total assets is beginning assets plus endign assets divided by two)
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