Question

The following financial information is for Alpha Corporation are for the fiscal years ending 2017 & 2016 (all balances are normal): 2017 2016 Item/Account $9,800 $9,400 Accounts Receivable Inventory 30,000 16,000 Net Sales (all credit) 85,000 71,000 Cost of Goods Sold 62,000 52,000 7,200 6,900 Net Income Use this information to determine for FY 2017: (Round & enter your answers to one decimal place and enter the value.) 1. the inventory turnover ratio 2. number of days of inventory 3. Gross Profit Margin 4. Profit Margin

Answer 1

1.accounts receivable turnover ratio = (Net receivable sales / Average receivable sales ) = ($80,000) /( ( $9800 + $9400)/2) = $80,000 / $9,600 = 8.33 times

2. average collection period accounts receivable = 365 / average receivable turnover ratio = 365/ 8.33 = 43.817~ 43.82 days

3. Gross Profit Margin = (Total sales - Cost of goods sold ) / Total sales

= ($80,000 - $49,000) / $80,000 = 38.75%

4. Profit Margin =Net profit / Sales = $7,200 / $80,000= 9%