Concept explainers
Ratio Analysis:
Ratio analysis is a tool to analyze the financial statements of a company which helps to express a mathematical relationship among the items of financial statements.
Receivables turnover ratio:
Receivables turnover ratio is an activity ratio, which measures the ability of the company to collect cash from its customers. This ratio also indicates the manner in which the company extends its credit policy and efficient collection of debts. It can be calculated by using the following formula:
The receivables turnover ratio of Company UC.
Inventory turnover ratio:
Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period. It helps to measure the efficiency of inventory management. It can be calculated by using the following formula:
The inventory turnover ratio.
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INTERMEDIATE ACCOUNTING
- Accounts receivable analysis A company reports the following: Sales 3,150,000 Average accounts receivable (net) 210,000 Determine (A) the accounts receivable turnover and (B) the number of days sales in receivables. (Round to one decimal place.)arrow_forwardQuestion 4 The New EV Truck Company has an operating cycle of 48 days, an accounts receivable period of 30 days and an accounts payable period of 17 days. The inventory period is [Select] ✓ days and the cash cycle is [Select] V [Select] days. Given a Cost of Goods sold expense of $227, 500 and Credit sales of $ 650,000, the average Accounts Payable balance is $ [Select] and the average inventory balance is $ 16 pts The New EV Truck Company has an operating cycle of 48 days, an accounts receivable period of 30 days and an accounts payable period of 17 days. The inventory period is days and the cash cycle is days. Given a Cost of Goods sold expense of \(\$ 227, 500 \) and Credit sales of \( \$ 650,000 \), the average Accounts Payable balance is \S and the average inventory balance is \(\$ \)arrow_forwardQuestion Content Area Based on the following data for the current year, what is the number of days' sales in receivables (rounded to one decimal place)? Assume 365 days a year. Sales on account during year $591,010 Cost of merchandise sold during year 158,044 Accounts receivable, beginning of year 44,597 Accounts receivable, end of year 46,544 Merchandise inventory, beginning of year 92,783 Merchandise inventory, end of year 119,254arrow_forward
- Question Content Area Based on the following data for the current year, what is the number of days' sales in receivables (rounded to one decimal place)? Assume 365 days a year. Sales on account during year $461,647 Cost of merchandise sold during year 196,997 Accounts receivable, beginning of year 41,839 Accounts receivable, end of year 52,205 Merchandise inventory, beginning of year 85,575 Merchandise inventory, end of year 109,714 a.155.7 days b.37.2 days c.77.2 days d.86.7 daysarrow_forwardChapter 17 Revenue and expense data for the current calendar year for Smith Electronics Company and for the electronics industry are as follows. The Smith Electronics Company data are expressed in dollars. The electronics Industry averages are expressed in percentages. Smith Electronics Electronics Industry Company Average $3,142,000 103.0% Sales 3.0% 150,000 Sales returns and allowances $2,992,000 100.0% Net sales 60.0% 1,850,000 Cost of goods sold 40.0% $1,142,000 Gross profit $750,000 23.0% Selling expenses 257,000 10.0% Administrative expenses 33.0% $1,007,000 Total operating expenses 7.0% $135,000 Operating income Other income 50,000 1.5% $185,000 8.5% 42,500 1.0% Other expense Income before income tax $142,500 7.5% Income tax expense 5.0% 76,000 $66,500 Net Income 2.5% a. Prepare a common-sized income statement comparing the results of operations for Smith Electronics Company with the industry average Round to one decimal place. b. As far as the data permit, comment on…arrow_forward34arrow_forward
- 3arrow_forwardEX 17-11 INVENTORY ANALYSIS THE FOLLOWING DATA WERE EXTRACTED FROM THE INCOME STATEMENT OF SALEH INC; CURRENT YEAR PRECEDING YEAR SALES 12,750,000 13,284,000 BEGINNING INVENTORIES 840,000 800,000 COGS 6,375,000 7,380,000 ENDING INVENTORIES 860,000 840,000 DETERMINE FOR EACH YEAR (1) THE INVENTORY TURNOVER AND (2) THE NUMBER OF DAYS' SALES IN INVENTORY. ROUND TO THE NEAREST DOLLAR AND ONE DECIMAL POINT.arrow_forward26 ces Required information [The following information applies to the questions displayed below] Simon Company's year-end balance sheets follow. At December 31 Assets Cash Accounts receivable, net Merchandise inventory. Prepaid expenses Plant assets, net Total assets Current Year $ 30,401 92,653 113,068 9,790 285,290 $ 531,208 1 Year Ago $ 37,001 66,035 85,566 9,809 259,527 $457,938 $ 133,593 97,870 162,500 137,245 $ 531,200 Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity For both the current year and one year ago, compute the following ratios: 2 Years Ago $ 37,413 48,906 53,137 3,994 227,050 $370,500 $ 76,618 104,272 163,500 113,548 $ 457,938 $ 49,884 81,062 161,500 76,054 $ 370,500 1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable?…arrow_forward
- 4arrow_forwardCurrent Year Preceding Year Sales $9,700,000 $7,175,000 Beginning inventories 420,000 400,000 Cost of goods sold 5,820,000 4,305,000 Ending inventories 550,000 420,000 a. (1.) Determine for each year the inventory turnover. Round answers to one decimal place. Current year ? Preceding year ? (2). Determine for each year the number of days' sales in inventory. Assume there are 365 days in the year. Round intermediate calculations to the nearest whole dollar and final answers to one decimal place. Current year ? Preceding year ? b. What conclusions can be drawn from these data concerning the inventories? (sales volume increased faster than the inventory, resultung in an improving inventory position/inventory increased faster than sales colume, resulting in a deteriorating inventroy position/ no conclusion about the inventory position can be drawn from these data)arrow_forwardQUESTION 6 A firm has an average age of inventory of 101 days an average collection period of 49 days, and an average payment period of 60 days. Assuming a 365-day year, the firm’s inventory turnover is ... 2.5. 3.2. 3.6. 4.0.arrow_forward
- Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning