SHOW ALL WORK Use the financial data shown below to calculate the following rati
ID: 2356705 • Letter: S
Question
SHOW ALL WORKUse the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
Income Statement data
Sales (all on credit) $650,000
Cost of Goods Sold 425,000
Income before taxes 78,000
Net income 54,600
Ending Begging
Balances Balances
Cash $19,500 $15,000
Accts Receivable (net) 65,000 60,000
Inventory 71,500 64,500
Plant and equipment (net) 195,000 183,900
Total Assets $351,000 $323,400
Current Liabilities $62,400 $52,700
Long term notes payable 97,500 100,000
Explanation / Answer
current ratio = (19500+65000+71500)/(62400) = 2.5 acid-test ratio = (19500 + 65000)/62400 = 1.352 accounts receivable turnover = 650,000 / ((65000+60000)/2) = 5.2 days sales uncollected = ((65000+60000)/2)/650,000 = 0.192308 * 365 = 70.19231 days inventory turnover = 650,000/((71500+64500)/2) = 9.558824 or inventory turnover = 425,000/((71500+64500)/2) = 6.25 depends if you do it based off Cost of Goods Sold or Net Sales days sales in inventory = 365/9.558824 = 38.18462 days
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