chapter 3 practice exercises - 1 Calculating Liquidity Ratios LO2 SDJ Inc has net working capital of \$1,370 current liabilities of \$3,720 and inventory

# chapter 3 practice exercises - 1 Calculating Liquidity...

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1. Calculating Liquidity Ratios [ LO2] SDJ, Inc., has net working capital of\$1,370, current liabilities of \$3,720, and inventory of \$1,950. What is the currentratio? What is the quick ratio? 2. Calculating Profi tability Ratios [LO2] Wakers, Inc., has sales of \$29 million,total assets of \$17.5 million, and total debt of \$6.3 million. If the profi t marginis 8 percent, what is net income? What is ROA? What is ROE? 3. Calculating the Average Collection Period [LO2] Ortiz Lumber Yard has a current accounts receivable balance of \$431,287. Credit sales for the year just ended were \$3,943,709. What is the receivables turnover? The days’ sales in receivables? How long did it take on average for credit customers to pay off their accounts during the past year? Receivables turnover = Sales / Receivables Receivables turnover = \$3,943,709 / \$431,287 = 9.14 times Days’ sales in receivables = 365 days / Receivables turnover = 365 / 9.14 = 39.92 days The average collection period for an outstanding accounts receivable balance was 39.92 days. 4. Calculating Inventory Turnover [LO2] The Blue Moon Corporation has ending inventory of \$407,534, and cost of goods sold for the year just ended was \$4,105,612. What is the inventory turnover? The days’ sales in inventory? How long on average did a unit of inventory sit on the shelf before it was sold? Inventory turnover = COGS / Inventory Inventory turnover = \$4,105,612 / \$407,534 = 10.07 times Days’ sales in inventory = 365 days / Inventory turnover = 365 / 10.07 = 36.23 days On average, a unit of inventory sat on the shelf 36.23 days before it was sold.  #### You've reached the end of your free preview.

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