Calculate CVS effectiveness of the last 5 years..Using the income statement and

Question

Calculate CVS effectiveness of the last 5 years..Using the income statement and the balance sheet .. Please use the " Efectivness or activity ratios chart " to do the problem.

EXHIBIT 2 EXHIBIT 2 effectiveness or activity ratios Total Sales t Turnover = Average Inventory Turnover = Days in InventoryInventory Tur Asset Turnover = Average Total Assets Cost of Goods Sold Average Inventory 365 Inventory Turnover Credit Sales Average Accounts Receivable Accounts Receivable Turnover = lif you don't know the amount of credit sales, use Sales) Days in Receivables = 365 A/R Turnover Accounts Payable Turnover Credit Purchases lif you don't know the amount of purchases, use Cost of Goods Sold) Days in Payables = -365 . Operating Cycle Days in Inventory + Days in Receivables Average Accounts Payable A/P Turnover - Days in Payables

Explanation / Answer

I’m showing you how to calculate Asset turnover for year 2014.

First we need to compute average Total assets.

Average total assets = (Beginning total asset + ending total asset)/2

Ending total asset is the asset for the given here so here it will be total asset in year 2014. Beginning total asset is total asset immediately before the given year so here it will be total asset in year 2013.

Average asset for 2014 = (74252000+71526000)/2

                                                = 72,889,000

Total asset turnover =total sales/ average total asset

                                        =139,367,000/ 72,889,000

                                        = 1.91 times

similarly you can compute the ratios for all other years.

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