For its most recent year a company had Sales (all on credit) of $830,000 and Cos
ID: 2481274 • Letter: F
Question
For its most recent year a company had Sales (all on credit) of $830,000 and Cost of Goods Sold of $525,000. At the beginning of the year its Accounts Receivable were $80,000 and its Inventory was $100,000. At the end of the year its Accounts Receivable were $86,000 and its Inventory was $110,000. The inventory turnover ratio for the year was 4.8 5.0 7.9 9 The accounts receivable turnover ratio for the year was 6.3 7.5 10.0 On average how many days of sales were in Accounts Receivable during the year? 27 37 49 On average how many days of sales were in Inventory during the year? 14 46 73 A company's net income after tax was $400,000 for its most recent year. The company's income statement included Income Tax Expense of $140,000 and Interest Expense of $60,000. At the beginning of the year the company's stockholders' equity was $1,900,000 and at the end of the year it was $2,100,000. What is the interest coverage for the company? 6.7 9.0 10.0 The debt to equity ratio is computed as: (Total Liabilities Total):1 Which of the following are likely to have the reported amounts on the balance sheet beingExplanation / Answer
8. The inventory turnover ratio for the year was 5.
Inventory turnover ratio = Cost of goods sold / Average inventory = $525,000 / $105,000 = 5
9. The accounts receivable turnover ratio for the year is 10.
Accounts receivable turnover ratio = Sales / Average accounts receivable = $ 830,000 / $ 83,000 = 10
10. On average, 37 days of sales were in accounts receivable during the year.
Days sales outstanding = Number of days in a year / Accounts receivable turnover = 365 / 10 = 36.5 or 37 approx.
11. On an average, 73 days of sales were in inventory during the year
Inventory conversion period = Number of days in the year / Inventory turnover = 365 / 5 = 73 days
12. The interest coverage for the company is 10.
Interest coverage = Earnings before interest and taxes / Interest expense = $ ( 400,000 + 140,000 + 60,000) / $ 60,000 = 10 times.
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