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: Receivable turnover ratio = Net credit sales Average net accounts receivables The receivables turnover ratio of Company UC.
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: Receivable turnover ratio = Net credit sales Average net accounts receivables The receivables turnover ratio of Company UC.
Solution Summary: The author explains that the receivables turnover ratio of Company UC is 5.45 times.
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:
Receivable turnover ratio=Net credit salesAverage net accounts receivables
The receivables turnover ratio of Company UC.
To determine
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:
Receivable turnover ratio=Net credit salesAverage net accounts receivables= $600,000$110,000=5.45 times
Problem 11 (Current Ratio)
The Artist Company has P1,312,500 in current assets and P525,000 in current liabilities. Its initial inventory level is P375,000 and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.0?
EX 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.
Ch 21-1 Inventory Management
Williams & Sons last year reported sales of $12 million, cost of goods sold (COGS) of $10 million, and an inventory turnover ratio of 2. The company is now adopting a new inventory system. If the new system is able to reduce the firm’s inventory level and increase the firm’s inventory turnover ratio to 5 while maintaining the same level of sales and COGS, how much cash will be freed up?
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