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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Describe how to calculate the following ratios

  1. (a) Return on owner’s equity
  2. (b) Accounts receivable turnover
  3. (c) Inventory turnover

(a)

To determine

State the way in which return on owners’ equity ratio is calculated.

Explanation

Return on owners’ equity is calculated by dividing net income by average owners’ equity. Formula for return on owners’ equity is shown below:

Return on owner

(b)

To determine

State the way in which accounts receivable turnover ratio is calculated.

(c)

To determine

State the way in which inventory turnover ratio is calculated.

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