Problem: Module $4$ Textbook Problem $8$

Learning Objectives:

$4-2$ Calculate ratios for assessing a company's liquidity

$4-4$ Calculate ratios for assessing a company's managerial effectiveness

Selected data from Adams Company follow:

Balance Sheets

As of December $31$

Year $3$ Year $2$

Accounts receivable $ $405,000$ $ $379,000$

Allowance for doubtful accounts $(20,250)(15,160)$

Net accounts receivable $ $384,750$ $ $363,840$

Inventories, lower of cost or market $ $483,000$ $ $437,000$

Income Statement

For the Years Ended December $31$

Year $3$ Year $2$

Net credit sales $ $2,010,000$ $ $1,756,000$

Net cash sales $415,000303,000$

Net sales $2,425,0002,059,000$

Cost of goods sold $1,602,0001,440,000$

Selling, general, and administrative expenses $240,800216,000$

Other expenses $40,00023,800$

Total operating expenses $ $1,882,800$ $ $1,679,800$

Required

a$.$ Compute the accounts receivable turnover for Year $3.$

b$.$ Compute the inventory turnover for Year $3.$

c$.$ Compute the net margin for Year $2.$