Use the financial data shown below to calculate the ollowing

Use the financial data shown below to calculate the ollowing ratios for the current year (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days\' sales uncollected. (e) Inventory turnover. (f) Days\' sales in inventory. Income statement data $650,000 78,000 54,600 Casn... Accounts receivable (net Inventory Plant and equipment (net\" Total asset Ending Beginning Balances Balances 19,500 15,000 60,000 64,500 195,000 183.900 $351000 $323,400 .. 65,000 71,500 Current liabilities. Long-term notes payable 62,400 S 52,700 97,500 100,000

Solution

Ratio formula calculation CR CA / CL (351000-195000) / 62400 = 2.5 times Acid Test R (CA-Inventory) / CL (156000-71500) / 62400 = 1.35 times Acc Receivable Turnover ratio Sales / Average AR 650000/(65000+60000)/2 = 10.40 times Days Sales Uncollected (AR/sales) * 365 (65000/650000) * 365 = 36.5 days Inventory Turnover ratio COGS/Average Inventory 425000/(71500+64500)/2 = 6.25 times Days sales in inventory (Inventory / COGS) * 365 (71500 / 425000) * 365 = 61.41 DAYS