Consider the following financial data for Northgate Corporat

\"Consider the following financial data for Northgate Corporation: Total assets, $1280 . Annual sales, $2400 . Net income, $108 Average inventory, $120 Current assets, $135 Current ratio, 2.4 * Days sales outstanding, 45 days On the basis of these financial data, determine the firm\'s current liabilities, receivables, total asset turnover and profit margin on sales.\"

Solution

Current Ratio = Current Assets / Current Liabilities
2.4 = $135 / Current Liabilities
Current Liabilities = $135 / 2.4 = $56.25

Total asset turnover = Sales / Total Assets = $2400 / $1280 = 1.875 times

Profit margin on sales = Net Income / Sales = $108 / $2400 = 4.50%

Days sales outstanding = (Receivables / Credit sales ) x 365
45 = (Receivables / $2400) x 365
Receivables = 45 x $2400 / 365 = $295.89