Question

The 2021 income statement of Anderson Medical Supply Company reported net sales of $10 million, cost of goods sold of $6.6 million, and net income of $890,000. The following table shows the company's comparative balance sheets for 2021 E and 2020: ($ in thousands) 2021 2020 $ 660 1,060 1,300 4,200 $ 7,220 $ 740 680 1,210 3,920 $ 6,550 Assets Cash Accounts receivable Inventory Property, plant, and equipment (net) Total assets Liabilities and shareholders' equity Current liabilities Bonds payable Common stock Retained earnings Total liabilities and shareholders' equity $ 1,320 2,100 2,800 1,000 $ 7,220 $ 1,190 2,100 2,800 460 $ 6,550 Required: 1. Calculate Anderson's turnover ratios for 2021. (Use 365 days a year. Round your answers to 2 decimal places.) Inventory turnover ratio Receivables turnover ratio Average collection period Asset turnover ratio... ......................... times times days times

Answer 1

1) inventory turnover ratio = cost of goods sold/average inventory

Average inventory = beginning inventory+ending inventory/2

Therefore average inventory=$1300000+$1210000/2

= $1255000

inventory turnover ratio= $6600000/$1255000

= 5.26 times

2) receivable turnover ratio = net sales/average receivable

average receivable = opening receivable+closing receivable/2

Therefore average receivable= $1060000+$680000/2

=$870000

Receivable turnover ratio =$10000000/$870000

= 11.50 times

3) average collection period = 365days/receivable turnover ratio

We already know receivable turnover ratio = 11.50times, therefore

Average collection period =365days/11.50= 32days

4) asset turnover ratio =net sales/average total assets

Average total assets = operating +closing/2

Therefore average total assets =$7220000+$6550000/2

= $6885000

asset turnover ratio = $10000000/$6885000

= 1.45times

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