Chapter 13, Managerial Accounting. Thank you Procter & Gamble is a multinational
ID: 2480963 • Letter: C
Question
Chapter 13, Managerial Accounting. Thank you
Procter & Gamble is a multinational corporation that manufactures and markets many products that you use every day. In 2010, sales for the company were $78,938 (all amounts in millions). The annual report did not report the amount of credit sales, so we will assume that all sales were on credit. The average gross profit percentage was 52.0 percent. Account balances follow: Required: 1. Compute the following turnover ratios. 2. By dividing 365 by your ratios from requirement 1, calculate the average days to collect receivables and the average days to sell inventory.Explanation / Answer
Answer:1.Inventory turnover ratio is calculated using the following formula:
Inventory Turnover =
Cost of Goods Sold
Average Inventories
Average Inventories =
Beginning Inventories + Ending Inventories
2
=6,880+6,384/2=10,072
Profit is 52% so cost of goods sold is 48%.i.e 37890i.e 48% of $78938.
So Inventory Turnover =$37890/10072=3.761
Receivable turnover ratio
Average Receivable=
Beginning Receivable + Ending Receivable
2
=$5836+$5335/2=$8,503.50
Receivable Turnover =
Net Sales
Average Receivable
= $ 78938/$8,503.50
= 9.28
2.Average day to collect receivable=365/Receivable turnover ratio
=365/9.28
=39.33 or 39 days
Average day to collect Inventory=365/inventory turnover ratio
=365/3.761
=97.02 or 97 days
Inventory Turnover =
Cost of Goods Sold
Average Inventories
Average Inventories =
Beginning Inventories + Ending Inventories
2
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