You are the credit manager for McHale Supply Inc. One of your sales staff has made a
Question:
The salesperson believes that Monteith would order about $240,000 per year of materials that would provide a gross margin of $40,000 to McHale if reasonable credit terms could be arranged.
Required:
State whether or not you would grant authorization for Monteith to purchase on credit and support your decision.
For the Years 2007-2011 Average annual sales growth Average annual operating income growth Average annual net income growth Average annual asset growth Average debt-to-equity ratio 12.6% 11.2% 15.3% 9.9% 0.36 4.12 2.61 3.89 16.8% 10.2% 10.6% 13.9% 0.29 Average inventory turnover ratio Average accounts receivable turnover ratio 3 For Montieth, you have the following data for the year ended December 31, 2011 $4,120,000 $367,000 $3,752,000 1.79 0.42 1.83 3.71 Net income Total assets Current ratio Inventory turnover ratic Accounts receivable turnover ratio
Step by Step Answer:
While Monteiths sales and asset growth are above average its profitabil...View the full answer
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
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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