21BP_a Jim Short鈥檚 Company makes clot... [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: 21BP_a (page 81)

Jim Short鈥檚 Company makes clothing for schools. Sales in 20X1 were
$4,820,000. Assets were as follows:
Cash
$163,000
Accounts receivable
889,000
Inventory
411,000
New plant and equipment
520,000
Total assets
$1,983,000
a. Compute the following:
1. Accounts receivable turnover.
2. Inventory turnover.
3. Fixed asset turnover.
4. Total asset turnover.

Short Answer

Expert verified

Account receivable turnover	5.42
Inventory turnover	11.73
Fixed assets turnover	9.27
Total assets turnover	2.43

Step by step solution

Account receivable turnover

$\begin{array}{rcl} Account receivable turnover & = & \frac{Net credit sales}{Average accounts receivables} \\ = & \frac{$ 4, 820, 000}{$ 889, 000} \\ = & 5.42 \end{array}$

Inventory turnover

$\begin{array}{rcl} Inventory turnover & = & \frac{Sales}{Inventory} \\ = & \frac{$ 4, 820, 000}{$ 411, 000} \\ = & 11.73 \end{array}$

Fixed assets turnover

$\begin{array}{rcl} Fixed asset turnover & = & \frac{Sales}{Fixed assets} \\ = & \frac{$ 4, 820, 000}{$ 520, 000} \\ = & 9.27 \end{array}$

Total assets turnover

$\begin{array}{rcl} Total asset turnover & = & \frac{Sales}{Total assets} \\ = & \frac{$ 4, 820, 000}{$ 1, 983, 000} \\ = & 2.43 \end{array}$

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	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

Lancaster corporation
Sales	\(246,000
Cost of goods sold	122,000
Gross profit	\)124,000
Fixed charges (other than interest)	27,500
Income before interest and taxes	\(96,500
Interest	21,800
Income before taxes	\)74,700
Taxes (35%)	26,145
Income after taxes	$48,555

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Short Answer

Step by step solution

Account receivable turnover

Inventory turnover

Fixed assets turnover

Total assets turnover

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Cash	\)163,000
Accounts receivable	889,000
Inventory	411,000
New plant and equipment	520,000
Total assets	$1,983,000