The partial financial statements of a company include the following items: Requirement Compute the following ratios for
Question:
Requirement
Compute the following ratios for the current year:
a. Current ratio
b. Acid- test ratio
c. Inventory turnover
d. Days sales in averagereceivables
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
1 Balance sheet item: 2Cash 3Shortorm irvestments Current year Preceding year 20,000 9,000 S 2,600 S 58,000 75,50098200 26000 8720 72500 4 Not trecevables S Inventory 6 Prepaid expenses 7 Total current assets 8 Total cutrent iablities 28900 174.000 is 175.420 116,000 94,000 10 Incomo statement: 11 Net credit sales 12 Cost of goods sold 13 423.400 292,300
Step by Step Answer:
a Current ratio 174000 150 116000 b Acidtest quick ...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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