20BP_b Perez Corporation has the follow... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 20BP_b (page 81)

Perez Corporation has the following financial data for the years 20X1 and 20X2:
20X1
20X2
Sales
$8,000,000
$10,000,000
Cost of goods sold
6,000,000
9,000,000
Inventory
800,000
1,000,000
b. Compute inventory turnover based on an alternative calculation that is used by many financial analysts, Cost of goods sold/Inventory, for each year.

Short Answer

Expert verified

The Inventory Turnover ratio for 20X1 and 20X2 is 7.5 and 9, respectively.

Step by step solution

Inventory turnover ratio for the year 20X1

$\begin{array}{rcl} Inventory turnover ratio & = & \frac{Cost of goods sold}{Inventory} \\ = & \frac{$ 6, 000, 000}{$ 800, 000} \\ = & 7.5 \end{array}$

Inventory turnover ratio for the year 20X2

$\begin{array}{rcl} Inventory turnover ratio & = & \frac{Cost of goods sold}{Inventory} \\ = & \frac{$ 9, 000, 000}{$ 1, 000, 000} \\ = & 9 \end{array}$

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Selling and administrative expenses	$112,000
Depreciation expenses	73,000
Sales	489,000
Interest expenses	45,000
Cost of goods sold	156,000
Taxes	47,000

BALANCE SHEET (in \) million)
Assets		Liabilities and Stockholder鈥檚 equity
Cash	\(7	Accounts payable	\)20
Accounts receivable	25	Accrued wages	7
Inventory	28	Accrued taxes	13
Current assets	\(60	Current liabilities	\)40
Fixed assets	45	Notes payable	15
		Common stock	20
		Retained earnings	30
Total assets	\(105	Total liabilities and stockholder鈥檚 equity	\)105

	Capable corporation	Muli-media inc
Net income	\(31,200	\)140,000
Sales	317,000	2,700,000
Total assets	402,000	965,000
Total debts	163,000	542,000
Stockholder鈥檚 equity	239,000	423,000

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Short Answer

Step by step solution

Inventory turnover ratio for the year 20X1

Inventory turnover ratio for the year 20X2

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	20X1	20X2
Sales	\(8,000,000	\)10,000,000
Cost of goods sold	6,000,000	9,000,000
Inventory	800,000	1,000,000