*Paraphrased from Financial Management, Ninth Edition Total--10 points Use the f
ID: 2773801 • Letter: #
Question
*Paraphrased from Financial Management, Ninth Edition Total--10 points Use the following industry average ratios to construct a pro forma balance sheet for Rajesh's Rowing, Inc. Total Asset Turnover 2.5 Times Average Collection Period 15 Days Fixed Asset Turnover 10 Times Inventory Turnover (based on COGS) 5 Times Current Ratio 4 Times Sales (all credit/no returns) $ 7,500,000 COGS 25% OF SALES Debt Ratio 60% Cash Current liabilities Accounts Receivable Long Term Debt Inventories Total Liab. Net Fixed Assets Total Equity (CS + RE) Total Assets Total Liab. + SE *Paraphrased from Financial Management, Ninth Edition Total--10 points Use the following industry average ratios to construct a pro forma balance sheet for Rajesh's Rowing, Inc. Total Asset Turnover 2.5 Times Average Collection Period 15 Days Fixed Asset Turnover 10 Times Inventory Turnover (based on COGS) 5 Times Current Ratio 4 Times Sales (all credit/no returns) $ 7,500,000 COGS 25% OF SALES Debt Ratio 60% Cash Current liabilities Accounts Receivable Long Term Debt Inventories Total Liab. Net Fixed Assets Total Equity (CS + RE) Total Assets Total Liab. + SEExplanation / Answer
Solution.
1. Net Fixed Assets = Sales / Fixed Asset Turnover
= 7,500,000 / 10 = 750,000
2. Accounts Receivable =
Avg. collection period = 15 days
Accounts Receivable / sales x 365 = 15 days
Accounts Receivable /7,500,000 x 365 = 15 ays
7,500,000 / 365 x 15 = 308,219
3. inventory = cogs /inventory turnover ratio
= 18,75,000 / 5 = 375,000
4. Verege total asset = net sales / Total Asset Turnover ratio
= 7,500,000 / 2.5 = 3,000,000
4.
Particular Amount Particular Amount Cash Current liabilities Accounts Receivable 308,219 Long Term Debt nventories 375,000 Total Liab. Net Fixed Assets 750,000 Total Equity (CS + RE) Total Assets Total Liab. + SERelated Questions
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