Problem 10-Use this information to answer the follow ing questions The following

Question

Problem 10-Use this information to answer the follow ing questions The following information (in S millions) comes from the Annual Report of Saratoga Springs Co. for the year ending 12/31/2018: Net sales Cost of goods sold Sales, general & administrative Interest expense Income before tax Net income Year ended 12/31/2018 7,949 4.767 1,909 416 857 458 12/31/2018 12/31/2017 Cash and cash equivalents Receivables, net Inventories Land, buildings and equipment at cost, net Total assets 973 1,010 1,055 13.500 64 664 519 3.844 16,5405,091 Total current liabilities Long-term debt Total liabilities Total stockholders' equity 5,747 2.209 5.591 2,22 11338 4.430 661 5.202 Required: Compute the following amounts for Saratoga Springs Co. 1. Its receivables tunover ratio for 2018. Round your answer to one decimal place. 2. Its inventory tumover ratio for 2018. Round your answer to one decimal place. 3. Its average collection period for 2018. Round your final answer to one decimal place. 4. Its average days in inventory for 2018. Round your final answer to one decimal place.

Explanation / Answer

Solution 1:

Receivables turnover ratio = Net sales / Average accounts receivables

Average accounts receivables = ($1,010 + $664) / 2 = $837

Receivable turnover ratio = $7,949 / $837 = 9.5 times

Solution 2:

Inventory turnover ratio = Cost of goods sold / Average inventory

Average inventory = ($1,055 + $519) / 2 = $787

Inventory turnover ratio = $4,767 / $787 = 6.1 times

Solution 3:

Average collection period = Nos of days in a year / Accounts receivable turnover = 365 / 9.5 = 38.4 days

Solution 4:

Average days in inventory = Nos of days in a year / Inventory turnover ratio = 365 / 6.1 = 59.8 days

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