Kestner Corporation has provided the following financial data: Year 2Year 1Accounts receivable, net$195,000 $200,000 Inventory$97,000 $100,000 Total assets$1,432,000 $1,410,000 Sales (all on account)$1,360,000 Cost of goods sold$870,000 Required:a. What is the company's accounts receivable turnover for Year 2?b. What is the company's average collection period for Year 2?c. What is the company's inventory turnover for Year 2?d. What is the company's average sale period for Year 2?e. What is the company's operating cycle for Year 2?f. What is the company's total asset turnover for Year 2?
What will be an ideal response?
a.
Accounts receivable turnover = Sales on account ÷ Average accounts receivable*
= $1,360,000 ÷ $197,500 = 6.89 (rounded)
*Average accounts receivable =
($195,000 + $200,000) ÷ 2 = $197,500
b.
Average collection period = 365 days ÷ Accounts receivable turnover
= 365 days ÷ 6.89 = 53.0 days (rounded)
c.
Inventory turnover = Cost of goods sold ÷ Average inventory*
= $870,000 ÷ $98,500 = 8.83 (rounded)
*Average inventory = ($97,000 + $100,000) ÷ 2 = $98,500
d.
Average sale period = 365 days ÷ Inventory turnover
= 365 days ÷ 8.83 = 41.3 days (rounded)
e.
Operating cycle = Average sale period + Average collection period
= 41.3 days + 53.0 days = 94.3 days
f.
Total asset turnover = Sales ÷ Average total assets*
= $1,360,000 ÷ $1,421,000 = 0.96 (rounded)
*Average total assets = ($1,432,000 + $1,410,000) ÷ 2 = $1,421,000
You might also like to view...
With respect to the core business processes, the ________ includes all the activities involved in developing, and launching high-quality products quickly and within budget
A) market-sensing process B) new-offering realization process C) fulfillment management process D) customer acquisition process E) customer relationship management process
Conducting post completion audits to determine if capital investment goals were achieved falls under which stage of the management process?
A) Planning B) Performing C) Evaluating D) Communicating
Apart from base pay and bonus, ________ includes stock-based incentives too.
A. total compensation B. benefit C. fringe D. total cash E. nominal compensation
The key issue for the brand owner in licensing is allowing the franchisee the flexibility in keeping the product and service uniform.
a. True b. False