Ratio Analysis The following information was taken from Nash, Inc.\'s trial bala

Question

Ratio Analysis

The following information was taken from Nash, Inc.'s trial balances as of December 31, 2010, and December 31, 2011.

1. Calculate the net profit margin and accounts receivable turnover for 2011. Round your answers to two decimal places.

2. How much does Nash make on each sales dollar? Round your answer to two decimal places.

in cents ?

12/31/2011 12/31/2010 Accounts receivable $ 32,000 $ 39,000 Accounts payable 47,000 36,000 Sales 212,400 128,000 Sales returns 4,000 2,300 Retained earnings 47,000 16,000 Dividends 5,000 1,000 Net income 36,000 9,000

1. Calculate the net profit margin and accounts receivable turnover for 2011. Round your answers to two decimal places.

2011 Net Profit Margin % Accounts Receivable Turnover

2. How much does Nash make on each sales dollar? Round your answer to two decimal places.

in cents ?

Explanation / Answer

SOLUTION

1. Net profit margin = Net income / Net sales

= $36,000 / ($212,400 - $4,000)

= $36,000 / $208,400

= 17.27%

Accounts receivable turnover = Net sales / Average accounts receivable

= ($212,400 - $4,000) / ((32,000+39,000)/2))

= $208,400 / $35,500

= 5.87

2. He will make 17.27 cents.

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