Question

The Hill Company reported the following results:

	Year 3		Year 2		Year 1
Income Statement
Revenue	10,972		11,598		10,470
Cost of Goods Sold	8,942		8,767		7,901
Selling, General & Admin. Expenses	2,470		2,611		2,479
Interest expense	76		80		28
Net Income	(516)		140		62
Balance Sheet
Assets
Cash	1,354		1,316		1,880
Prepaid expenses	202		522		125
Accounts receivable	375		250		231
Inventory	745		698		455
Property & equipment (net)	20,464		18,810		17,727
Total Assets	23,140		21,596		20,418
Liabilities
Accounts payable	2,824		743		678
Unredeemed gift cards	410		850		636
Notes Payable	15,457		18,048		17,024
Stockholders' Equity
Common Stock	985		545		815
Retained Earnings	3,464		1,410		1,265
Total Liabilities & Equity	23,140		21,596		20,418

1. What is the company's days sales in inventory ratio for Year 2? Round your final answer to one decimal place.

2. What is the company's return on investment ratio for Year 1? Convert your final answer to a percentage, round to one decimal place and enter without the "%" sign (e.g. a final answer of 0.105678 would be entered as 10.6).

Answer 1

1. Inventory turnover ratio = Cost of goods sold/ Average inventory

= 8,767 / [( 698 + 455) /2]

= 15.207285

days sales in inventory ratio for Year 2 = 365 / 15.207285 = 24 days

2. Return on investment = Net income / Stockholders equity = 62/ (815 + 1265) = 3.0%