Calculate the following ratios for 2013. (Do not round intermediate calculations

ID: 2419640 • Letter: C

Question

Calculate the following ratios for 2013. (Do not round intermediate calculations. Consider 365 days a year. The expected format for rounding is presented in each row of the table.)

1-Inventory turnover ratio

2-Average days in inventory

3-Receivable turn over ratio

4-Average collection period

5-Assett turn over ratio

6-Profit Margin on sales

7-Return on assets

8-Return on shareholders equity

9-Equity Multiplier

10-Return on shareholders equity-using the dupont framework

Financial statements for Askew Industries for 2013 are shown below:

Explanation / Answer

Calculations of ratio analysis

1-Inventory turnover ratio =cost of goods sold / Average inventory=6350/1130=5.62

2-Average days in inventory=365/Inventory turnover=365/5.62=65days

3-Receivable turn over ratio=Net sales/Average Gross receivables=9200/830=11.08

4-Average collection period=365 days/Receivables turnover=365/11.08=33 days

5-Assett turn over ratio=Net sales/ Average total assets =9200/6120=1.48

6-Profit Margin on sales=Net income/ Net sales=348/9200=3.78%

7-Return on assets=Net income / Average total assets=348/6120=5.68%

8-Return on shareholders equity= Net income /Equity=348/1540=22.60%

9-Equity Multiplier= Total asets/ Stock holders equity=4260/1540=2.76

10-Return on shareholders equity-using the dupont framework=Profit margin*Total assets turnover*Financia leverage=2.76*1.48*0.0317=15.55%

Average inventory=opening inventory+closing inventory/2=820+620/2=1130

Average Gross receivables=opening receivables+ closing receivables/2=620+420/2=830

Receivables turnover= sales revenue/ average accounts receivables=9200/830=11.08

Average total assets=4260+3860/2=6190

Equity = paid up capital + reserve and surplus=620+920=1540

Financial leverage=total assets/ total equity=4260/1540=2.76

Total assets turnover=Net sales/ average total assets=9200/6190=1.48

profit margin= Net income / Net sales=348/9200=3.17%

Inventory turnover= Cost of goods sold / average inventory=6350/1130=5.62