The firm has the information: inventory ($10,000),accounts receivable ($5,000),

Question

The firm has the information: inventory ($10,000),accounts receivable ($5,000), annual credit sales ($12,000), inventory ($14,000), cost of goods sold ($15,000), calculate:

a. the days in receivable

b. Account receivable turn over ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

c. Day’s in inventory ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

Explanation / Answer

a. Receivables Turnover = Net Sales / Average Net Accounts Receivable

= $ 12,000 / $ 5,000

= 2.4

The days in receivable = 365 Days / Receivables Turnover

= 365 / 2.4

= 152.0833

Hence the correct answer is 152.08

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b. Account receivable turnover = Net Sales / Average Accounts Receivable

= $ 12,000 / $ 5,000

= 2.4  

Hence the correct answer is 2.40

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c. Day’s in inventory = Inventory / Cost of goods Sold * Days in a Year

= $ 10,000 / $ 15,000 * 365

= 243.33

Hence the correct answer is  243.33

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