91Ó°ÊÓ

Requirement 1

Average Merchandise Inventory = ($6,900 + $8,600)/2

Average Merchandise Inventory = $15,500/2

Average Merchandise Inventory = $7,750

Inventory Turnover Cost of Goods Sold/ Average Merchandise Inventory

Inventory Turnover = $28,400 / $7,750

Inventory Turnover = 3.66 times

Days' Sales in Inventory = 365 / Inventory Turnover

Days' Sales in Inventory = 365 / 3.66

Days' Sales in Inventory = 100 days

Gross Profit= Net Sales Revenue - Cost of Goods Sold

Gross Profit= $40,600-$28,400

Gross Profit= $12,200

Gross Profit Percentage= Gross profit/ Net Sales Revenue

Gross Profit Percentage = $12,200 / $40,600

Gross Profit Percentage = 30.0%

Requirement 2

Average Accounts Receivable = ($7,500 +$5,200)/2

Average Accounts Receivable = $12,700/2

Average Accounts Receivable = $6,350

Accounts Receivable Turnover Ratio= Net Sales Revenue / Average Accounts Receivable

Accounts Receivable Turnover Ratio =$40,600 / $6,350

Accounts Receivable Turnover Ratio = 6.394 times

Days' Sales in Average Receivables = 365/ Accounts Receivable Turnover Ratio

Days' Sales in Average Receivables = 365/ 6.394

Days' Sales in Average Receivables = 57 days

Requirement 3

Accel's Companies' have a high amount of inventory on hand and a low inventory turnover. This could be an area to look at and compare to the prior year and industry average. They have a low gross profit percentage, which is a bad indicator. The amount of time it takes to collect receivables seems high, but this would depend on the credit terms.