E13-9 Computing the Accounts Receivable and Inventory Turnover Ratios [LO 13-4,

Question

E13-9 Computing the Accounts Receivable and Inventory Turnover Ratios [LO 13-4, LO 13-51 Procter & Gamble is a mulfinational corporation that manufactures and markels many products that you use every day. In 2013, sales for the company were $84,000 (all amounts in millions). The annual report did not report the amount of credit sales, so we will assume that all sales were on credit. The average gross profi percentage was 49.8 peroent. Account balances for that yoar follow $6,100 $6,500 6,700 6,900 (net) Accounts receiveble Inventory Required: 1. Computo the following tumover ratios. (Do not round intermediate calculations. Round your final answers to 1 decimal place.) Receivables Tumover Ratio Inventory Turmover Ratio 2. By dividing 365 by your ratios from requirement 1, caloulate the averago days to oolloct receivables and the average days to sell Inventory. (Round your intermediate calculations and final answers to 1 decimal place.) Average Days to Collect Recelvables Average Days to Sel Inventory days days

Explanation / Answer

1. Receivables Turnover Ratio = Credit Sales / Average Accounts Receivable

= $ 84,000 / [ (6,100 +6,500) / 2]

= 13.3

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

= $ 42,336 / [ ( 6,700 + 6,900)/2]

= 6.2

Note :

Cost of Goods Sold = Sales - Gross Profit

= $ 84,000 - (49.6% * $ 84,000)

= $ 42,336

2. Average Days to Collect Receivables = 365 Days / Receivables Turnover Ratio

= 365 /13.3

= 27.4

Average Days to Sell Inventory= 365 Days / Inventory Turnover

= 365 /6.2

= 58.9

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.