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: 2 Cash 3Short-term investments 4 Netreceivables 5 Inventory 6 Prepaid expenses 7Total current assets Current year Preceding year 16,500 10,750 49,000 81,000 21,500 178,750211,360 125,00086000 23,500 24,000 77360 78500 8,000 Total current liabilities 10 Income statement: 11 Net credit sales 12 Cost of goods sold 13 427050 319,000
Step by Step Answer:
a Current ratio 178750 143 125000 b Acidtest ...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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