ACTG 1P11 Lecture Notes - Lecture 24: Inventory Turnover, Current Liability, European Cooperation In Science And Technology

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oliveleopard762

19 Jan 2017

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Liquidity: (cid:373)easures a (cid:272)o(cid:373)pa(cid:374)y"s short-term ability to pay its maturing obligations (usually its current liabilities), and to meet unexpected needs for cash. Working capital difference, between current assets and current liabilities. When working capital is positive, there is a greater likelihood. That the company will be able to pay its liabilities. Current ratio for every dollar of current liabilities, you this much of current liabilities. Inventory turnover ratio measures the number of times, on average, that is inventory is sold during the period. Days in inventory converts inventory turnover into a measure of the average age of the inventory. Receivables turnover measures the number of times, on average, that receivables are collected during the year. Average collection period collecting receivables in how many days, the faster the better. Cash current debt coverage cash provided by operating activities is 1. 4 more times than its average current liabilities. = net cash provided (used) by operating activities / avg current liabilities.

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Exercise 193 Booker Corporation had the following comparativecurrent assets and current liabilities: Dec. 31, 2017 Dec. 31, 2016Current assets Cash $60,000 $30,000 Short-term investments 40,00010,000 Accounts receivable 55,000 95,000 Inventory 110,000 90,000Prepaid expenses 35,000 20,000 Total current assets $300,000$245,000 Current liabilities Accounts payable $140,000 $110,000Salaries payable 40,000 30,000 Income tax payable 20,000 15,000Total current liabilities $200,000 $155,000 During 2017, creditsales and cost of goods sold were $750,000 and $400,000,respectively. Compute the following liquidity measures for 2017:(Round current and acid-test ratios to 2 decimal places, e.g.52.71.) 1. Current ratio :1 2. Working capital $ 3. Acid-test ratio:1 4. Accounts receivable turnover times 5. Inventory turnovertimes

maroonturtle752

1. The formula for Accounts Receivable turnover is

Select one:

a. Net Sales / average accounts receivable

b. Cost of goods sold / average accounts receivable

c. Net Sales / average merchandise inventory

d. 360 days / average accounts receivable

2. The category of ratios that determine the economic status ofpublicly-traded companies is

Select one:

a. Profitability ratios

b. Market value ratios

c. Liquidity Ratios

d. Solvency ratios

3. The working capital ratio is

Select one:

a. Quick assets / current liabilities

b. Working capital /current liabilities

c. Current assets minus current liabilities

d. Current assets/current liabilities

4. Earnings per share is calculated by

Select one:

a. Dividing net income by the authorized ordinary shares.

b. Dividing net income less preferred dividends by number ofordinary shares outstanding.

c. None of the above.

d. Dividing net income by the total number of ordinary andpreferred shares issued.

5. Which of the following belong to the profitabilityratios?

Select one:

a. Rate of return on equity

b. Rate of return on assets

c. All of the above

d. Gross Profit Margin

6. The category of ratios that shows the ability of the firm topay its long-term obligations is

Select one:

a. Profitability ratios

b. Solvency ratios

c. Market value ratios

d. Liquidity Ratios

7. Operating profit margin equals

Select one:

a. Income from operations / sales

b. Net income / sales

c. Gross profit / sales

d. Profit from operations / cost of sales

8. The following are quick assets except

Select one:

a. Short-term investments

b. Merchandise Inventory

c. Accounts Receivable

d. Cash

9. The following are liquidity ratios except

Select one:

a. Earnings per share

b. Working capital ratio

c. Quick ratio

d. Receivable turnover

10. Quick assets equals

Select one:

a. All current assets

b. Cash and Accounts receivable only.

c. Total assets less non-current assets

d. Current assets minus inventory

jadebear393

Total asset turnover 2.3times

Average collection period( assume a 365 day year) 8.7 days

Fixed assets turnover 5.1 times

Inventory turnover ( based on cost of goods sold ) 3.4

Current ratio 1.7

sales ( all on credit ) $ 4.23 million

cost of goods sold 80%

Debt ratio 55%

Use the following industry average ratios to construct a proforma balance sheet for Carlos Menza, Inc.

The company cost of goods sold is $..... ( round to the nearestdollar )

The company total assets are $.....( round to the nearest dollar)

The company fixed assets are $ ....( round to the nearest dollar)

The company accounts receivables is $ .....( round to thenearest dollar )

The company inventories are $.......( round to the nearestdollar )

The company current liabilities are $ .....( round to thenearest dollar )

The company's total liabilities are $ .....( round to thenearest dollar )

complete Carlos Menza balance sheet below ......( round to thenearest dollar )

Carlos Menza

Pro Forma Balance Sheet Cash $..... Current liabilities $ ....

Account receivable.......... Long-term debt ......

Inventory........ Total liabilities $ ......

Net fixedassets........ Common equity .....

Total$....... Total $ .........

grayyellowjacket345

ACTG 1P11 Lecture Notes - Lecture 24: Inventory Turnover, Current Liability, European Cooperation In Science And Technology

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