Use the following data to calculate the requested ratios: * Prior- period inventory was 170. a. Current
Question:
* Prior- period inventory was 170.
a. Current ratio
b. Days accounts receivable
c. Inventory turnover
d. Days accounts payable outstanding
e. Debt to equity
f. Times interest earned
g. ROE
h. Total asset turnover (asset utilization)
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Assets Liabilities and Equity Income Statement 400 Net sales 80 Accounts payable Accounts receivable 700 Accrued expenses Cash 9,125 6,100 500 Notes payable-bank 40 Operating expenses 2,550 101 80 COGS Inventory Current assets Fixed assets 1,280 CM LTD 50 Interest expense 980 Other income 550 Other expenses 970 axes 1220 Current liabilities LTD 48 112 216 Total assets 2,500 Equity Total liabilities and 2,500 Net income
Step by Step Answer:
Ratios aCurrent ratio 1280980 131X bDays accounts receivable 700 9125365 28 days cIn...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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