Question


Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear belo
Total stocROLOS DULY Total liabilities and stockholders equity $50,280 $45,960 Woller Corporation Comparative Income Stateme
Compute the following financial data for this year: 1. Accounts receivable turnover. (Assume that all sales are on account.)
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Answer #1
1) Average Account Receivables = (beginning Account Receivables + ending Account Receivables)/2
= ( $9100+12300)/2
= $ 10700
Account Receivables Turnover Ratio = Sales / average Account Receivables
= $79000/10700
=7.38 times
2) Average Collection Period = 365/ Account Receivables turnover ratio
= 365 days /7.38
=49.46 days
3) Average Inventory = (beginning inventory + ending inventory)/2
= ( $9700+8200)/2
= $ 8950
Inventory Turnover Ratio = Cost of goods sold / average inventory
= $52000/8950
=5.81 times
4) Average Sales period = 365/ inventory turnover ratio
= 365 days /5.81
=62.82 days
5) Operating Cycle = Average Sales Period + Average Collection Period
=49.96+62.82
=112.78 Days
6) Average Assets = (beginning Assets + ending Assets)/2
= ( $45960+50280)/2
= $ 48120
Assets Turnover Ratio = Sales / average Assets
= $79000/48120
=1.64 times
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Answer #2

#5. Operating cycle is 112.28 days. Average sales period should be 49.46 not 49.96. 

source: Your calculations
answered by: Kevin
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