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Chapter 13 Homework 1 - Professor Smith ACCT151 23 October...

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Professor Smith ACCT151 23 October 2008 Chapter 13 Homework 1 D6,E3,E5,E6 D6) Year 3 Year 2 Year 1 Sales 125,000 100% 110,000 100% 100,000 100% COGS 62,000 49.60% 49,000 44.50% 40,000 40% G. Profit 63,000 51.40% 61,000 55.50% 60,000 60% Op. Exp 53,000 42.40% 49,000 55.40% 45,000 45% Net Income 10,000 8% 12,000 10.90% 15,000 15% Net income has decreased while sales have increased because COGS and Op. Expenses have increased E3) a. Accounts receivable turnover ratio = net credit sales/avg. accounts receivable b. Number of days in receivables = number days in period/accts. receivable turnover c. Inventory turnover ratio = costs of goods sold/avg. inventory d. Number of days in inventory = number days in period/inventory turnover e. Cash to cash operating cycle = # days in inventory + # days in receivables Coca-Cola: a. 9.9 b. 36.4 c. 5.41 d. 66.5 e. 102.9 Pepsi-Co: a. 10.06 b. 35.8 c. 8.71 d. 41.3 e. 77.1 Both companies have similar A/R turnover ratios. Pepsi has a low cash to cash cycle because it has a higher inventory turnover ratio. E5) Working capital = current assets – current liabilities
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