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

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 ( #.# ) ___ times

2) average days in inventory ( #.## )______days

3) receivable turnover ratio (#.# ) _______times

4) average collection period ( #.## ) _________days

5) asset turnover ratio ( #.##) __________times

6) profit margin on sales ( #.##)__________

7) retuen on assets ( #.## ) _________

8) return on shareholders equity ( #.# ) ________

9) equity multiplier ( #.## ) ________ times

10) return on shareholders equity ( using the dupont framework) ( #.#)_________

Explanation / Answer

1. Inventory Turnover Ratio = Sales / inventory

                                                     = $ 8,800/$780

                                                    = 11.3 times

2. average days in inventory = Inventory/cost of sales * 365

                                                        = $ 780/$ 6250 * 365

                                                       = 45.55 Days

3. Receivable turnover ratio = Net Credit Sales / Average account receivables

                                                 = 8,800/580

                                                  = 15.17 Times (assuming all sales are made on credit)

4. average collection period = Days* Average amount of accounts receivables / credit sales

                                               = 365*580/8,800

                                                = 24.06 Days

5. asset turnover ratio = Sales /Total Assets

                                     =   8800/3740

                                     = 2.35 Times

6. profit margin on sales = Net Income/Net Sales

                                          = 252/8800

                                          = 0.02 Times

7. return on assets = Net Income /Total Assets

                               = 252/3740

                              =0.08

8. return on shareholders’ equity = Net Income/Shareholder’s Equity

                                                         =252/2760

                                                         =0.09

9. equity multiplier = Total Assets/Total Shareholder’s equity

                                = 3740/2760

                                =1.36 times

10. Return on shareholders’ equity ( using the dupont framework)= (net income/sales) * (sales/assets) * (assets/equity)

= Profit Margin* Total Asset Turn over* equity Multiplier

= 0.02* 2.35* 1.36

= 0.06

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