Presented below are select financial data from the annual report: Amounts in mil
ID: 2476402 • Letter: P
Question
Presented below are select financial data from the annual report:
Amounts in millions
Year 1
Year 2
Balance sheet
Accounts receivable (net)
$14,233
$14,851
Inventory
9,778
10,474
Income statement
Net sales
$84,705
$92,589
Cost of goods sold
61,759
66,814
Calculate the following ratios:
Accounts receivable turnover
Receivable collection period
Inventory turnover
Inventory-on-hand period
Evaluate General Electric’s accounts receivable and inventory management
Amounts in millions
Year 1
Year 2
Balance sheet
Accounts receivable (net)
$14,233
$14,851
Inventory
9,778
10,474
Income statement
Net sales
$84,705
$92,589
Cost of goods sold
61,759
66,814
Explanation / Answer
Assuming the ratios are required for year 2 Amounts in millions Year 1 Year 2 Balance sheet Accounts receivable (net) $14,233 $14,851 Average Accounts Receivable $14,542 Inventory 9,778 10,474 Average Inventory 10,126 Income statement Net sales $84,705 $92,589 Cost of goods sold 61,759 66,814 Accounts Receivable Turonover= Net Sales /Average Accounts Receivable=92589/14542= 6.37 times Receivables Collection period=365/Accounts Receivable Turnover=365/6.37= 57.33 days Inventory Turnover= COGS/Average Inventory=66814/10126= 6.60 times Inventory on hand period=365/Inventory Turnover=365/6.60= 55.32 days
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