Accounts Receivable and Inventory Ratios
Bell Company, whose current assets at December 31 are shownbelow, had net sales for the year of $900,000 and cost of goodssold of $550,000. At the beginning of the year, Bellâs accountsreceivable (net) were $160,000 and its inventory was $195,000.
Cash $29,000 Short-term investments 49,400 Accounts receivable (net) 170,000 Inventory 200,000 Prepaid expenses 11,600 Current assets $460,000
Round the turnover calculations to two decimal points. Use 365 daysin a year and round days calculations to the nearest day (wholenumber).
a. What is the companyâs accounts receivable turnover for theyear?
b. What is the companyâs average collection period for theyear?
days
c. What is the companyâs inventory turnover for the year?
d. What is the companyâs daysâ sales in inventory for theyear?
days
Accounts Receivable and Inventory Ratios
Bell Company, whose current assets at December 31 are shownbelow, had net sales for the year of $900,000 and cost of goodssold of $550,000. At the beginning of the year, Bellâs accountsreceivable (net) were $160,000 and its inventory was $195,000.
| Cash | $29,000 |
| Short-term investments | 49,400 |
| Accounts receivable (net) | 170,000 |
| Inventory | 200,000 |
| Prepaid expenses | 11,600 |
| Current assets | $460,000 |
Round the turnover calculations to two decimal points. Use 365 daysin a year and round days calculations to the nearest day (wholenumber).
a. What is the companyâs accounts receivable turnover for theyear?
b. What is the companyâs average collection period for theyear?
days
c. What is the companyâs inventory turnover for the year?
d. What is the companyâs daysâ sales in inventory for theyear?
days
Related questions
Working Capital and ShortâTerm LiquidityRatios
Bell Company has a current ratio of 3.00 (3.00:1) on December 31.On that date the companyâs current assets are as follows:
| Cash | $29,000 |
| Short-term investments | 49,400 |
| Accounts receivable (net) | 170,000 |
| Inventory | 200,000 |
| Prepaid expenses | 11,600 |
| Current assets | $460,000 |
Bell Companyâs current liabilities at the beginning of the yearwere $140,000 and during the year its operating activities provideda cash flow of $60,000.
a. What are the firmâs current liabilities on December 31?
b. What is the firmâs working capital on December 31?
c. What is the quick ratio on December 31? Round to 2 decimalpoints.
d. What is the Bellâs operating-cash-flow-to-current-liabilitiesratio? Round to 2 decimal points.
| Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 700,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year. The market value of the companyâs common stock at the end of the year was $26. All of the companyâs sales are on account. |
| Weller Corporation Comparative Balance Sheet (dollars in thousands) | ||||||
| This Year | Last Year | |||||
| Assets | ||||||
| Current assets: | ||||||
| Cash | $ | 1,230 | $ | 1,260 | ||
| Accounts receivable, net | 11,000 | 7,700 | ||||
| Inventory | 12,900 | 11,600 | ||||
| Prepaid expenses | 760 | 550 | ||||
| Total current assets | 25,890 | 21,110 | ||||
| Property and equipment: | ||||||
| Land | 9,400 | 9,400 | ||||
| Buildings and equipment, net | 46,247 | 36,256 | ||||
| Total property and equipment | 55,647 | 45,656 | ||||
| Total assets | $ | 81,537 | $ | 66,766 | ||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 20,400 | $ | 18,300 | ||
| Accrued liabilities | 960 | 770 | ||||
| Notes payable, short term | 230 | 230 | ||||
| Total current liabilities | 21,590 | 19,300 | ||||
| Long-term liabilities: | ||||||
| Bonds payable | 8,900 | 8,900 | ||||
| Total liabilities | 30,490 | 28,200 | ||||
| Stockholders' equity: | ||||||
| Common stock | 700 | 700 | ||||
| Additional paid-in capital | 4,000 | 4,000 | ||||
| Total paid-in capital | 4,700 | 4,700 | ||||
| Retained earnings | 46,347 | 33,866 | ||||
| Total stockholders' equity | 51,047 | 38,566 | ||||
| Total liabilities and stockholders' equity | $ | 81,537 | $ | 66,766 | ||
| Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) | ||||||
| This Year | Last Year | |||||
| Sales | $ | 84,150 | $ | 66,000 | ||
| Cost of goods sold | 44,100 | 41,000 | ||||
| Gross margin | 40,050 | 25,000 | ||||
| Selling and administrative expenses: | ||||||
| Selling expenses | 10,800 | 10,700 | ||||
| Administrative expenses | 6,800 | 6,700 | ||||
| Total selling and administrative expenses | 17,600 | 17,400 | ||||
| Net operating income | 22,450 | 7,600 | ||||
| Interest expense | 890 | 890 | ||||
| Net income before taxes | 21,560 | 6,710 | ||||
| Income taxes | 8,624 | 2,684 | ||||
| Net income | 12,936 | 4,026 | ||||
| Dividends to common stockholders | 455 | 700 | ||||
| Net income added to retained earnings | 12,481 | 3,326 | ||||
| Beginning retained earnings | 33,866 | 30,540 | ||||
| Ending retained earnings | $ | 46,347 | $ | 33,866 | ||
| Required: | |
| Compute the following financial data for this year: |
| 1. | Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.) |
| 2. | Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) |
| 3. | Inventory turnover. (Round your answer to 2 decimal places.) |
| A. | Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) |
| B. | Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.) |
| C. | Total asset turnover. (Round your answer to 2 decimal places.) |
