Use the financial data shown below to calculate the ollowing ratios for the curr

Question

Use the financial data shown below to calculate the ollowing ratios for the current year (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days' sales uncollected. (e) Inventory turnover. (f) Days' sales in inventory. Income statement data $650,000 78,000 54,600 Casn... Accounts receivable (net Inventory Plant and equipment (net" Total asset Ending Beginning Balances Balances 19,500 15,000 60,000 64,500 195,000 183.900 $351000 $323,400 .. 65,000 71,500 Current liabilities. Long-term notes payable 62,400 S 52,700 97,500 100,000

Explanation / Answer

Ratio formula calculation CR CA / CL (351000-195000) / 62400 = 2.5 times Acid Test R (CA-Inventory) / CL (156000-71500) / 62400 = 1.35 times Acc Receivable Turnover ratio Sales / Average AR 650000/(65000+60000)/2 = 10.40 times Days Sales Uncollected (AR/sales) * 365 (65000/650000) * 365 = 36.5 days Inventory Turnover ratio COGS/Average Inventory 425000/(71500+64500)/2 = 6.25 times Days sales in inventory (Inventory / COGS) * 365 (71500 / 425000) * 365 = 61.41 DAYS

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