Harmony Corporation reported these figures: Harmony has 3,125 shares of common stock outstanding. Its stock has traded
Question:
Harmony has 3,125 shares of common stock outstanding. Its stock has traded recently at $ 31.20 per share. You would like to gain a better understanding of Harmonys financial position. Calculate the following ratios for 2014 and interpret the results:
a. Inventory turnover
b. Days sales in receivables
c. Acid- test ratio
d. Times- interest- earned
e. Return on stockholders equity
f. Earnings per share
g. Price/ earningsratio
Harmony Corporation Balance Sheets December 31, 2014 and 2013 Harmony Corporation Income Statement For the Year Ended December 31, 2014 (amounts in thousands) (amounts in thousands 2014 2013 2014 Sales revenues Less: Cost of goods sold 13,140 980 11,160 7 Current assets: 8 Cash 9 Accounts recevable 10 Inventory 11 0ther current assets 12 Total current assets 13 0ther assets 14 Total assets 15 16 17 I Total current liabilities 18 Long-term liabilities 19 Total liabilities 20 21 22 Total common stockholders' equity 23 24 Total liablities and equity 25 ー57001$ 2,700.- 」Gross profit 2,100 1,860 LessOperating expenses 1,000 800Oper ating income 2,640Less: Interest expense 10500 S 10,000 S 3,000 12,750 S 8000 Income before income taxes ILess: income tax expense. Net income Liabilities 6,25012500 21 15,000 18,000 Stockholders' equity 36,250
Step by Step Answer:
a Inventory turnover 1980 22 900 Harmony sells its inventory 22 times per year This seems low A comp...View the full answer
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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