Question

Shine's has 100,000 common shares outstanding during 2016, Requirements inventory turnover, days' sales in inventory, and gross profit percentage for Shine's Companies for 2016. 2. Compute days' sales in receivables during 2016. Round dollar amounts to three decimal places. Assume all sales were on account. 3. What do these ratios say about Shine's Companies' ability to sell inventory and collect receivables? Requirement 1. Compute the inventory turnover, days' sales in inventory, and gross profit percentage for Shine's Companies for 2016 Compute the inventory turnover (Round your answer to two decimal places, XXX) The inventory tumover v times Compute the days' sales in inventory (Round interim calculations to two decimal places. X.XX and round your final answer to the nearest Whole day.) The days' sales in inventory - days rnmruto the nose nimtit norantana Rruind wir answer to the nearest tonth of a narrant xxar Enter your answer in each of the answer boxes

Answer 1

1. Inventory turnover for 2016 = Cost of Goods Sold / Average Inventory = 20,600,000 / 7,650,000 = 2.69 times

Days sales in inventory for 2016 = 365 / Inventory Turnover = 365 / 2.69 = 136 days.

Gross profit percentage for 2016 = ( Net Sales - Cost of Goods Sold ) / Sales * 100 = ( 57,200,000 - 20,600,000 ) / 57,200,000 * 100 = 64 %

2. Days sales in receivables = ( 365 / Sales ) * Average Accounts Receivables = ( 365 / 57,200,000 ) * 6,300,000 = 40 days

3. Shine company is very slow and inefficient in selling inventory, as its inventory turns over ones in 136 days on an average.

Shine Company is also not very efficient in collecting its receivables, as the customers enjoy 40 days of credit on an average.