65 days 1 899 328000 365 days 21178 430000 365 days b The inventory position of

65 days 1 899 328000 365 days 21178 430000 365 days b

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= 35.65 days 1 $899 = $328,000 ÷ 365 days 2 $1,178 = $430,000 ÷ 365 days b. The inventory position of the business has deteriorated. The inventory turno- ver has decreased, while the number of days’ sales in inventory has in- creased. The sales volume has declined faster than the inventory has de- clined, thus resulting in the deteriorating inventory position.
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Ex. 17–12 1 2
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783 Ex. 17–13 a. Ratio of liabilities to stockholders’ equity: Total liabilities Total stockholders' equity Dec. 31, 2006: $2,500,000 $1,350,000 = 0.54 Dec. 31, 2005: $2,200,000 $1,540,000 = 0.70 b. Number of times bond interest charges were earned: expense Interest expense Interest + tax before Income Dec. 31, 2006: $96,000 * 000 , $96 $528,000 + = 6.50 Dec. 31, 2005: $112,000 * * $112,000 $336,000 + = 4.0 *$1,200,000 × 8% = $96,000 **$1,400,000 × 8% = $112,000 c. Both the ratio of liabilities to stockholders’ equity and the number of times bond interest charges were earned have improved significantly from 2005 to 2006. These results are the combined result of a larger income before taxes and lower serial bonds payable in the year 2006 compared to 2005.
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Ex. 17–14 +
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