Question

The financial information below presents selected information from the financial statements of Pelican Company. Sales revenue during the current year was $13,300,300 and cost of goods sold was $8,915,195. All of Pelican's sales are made on account and are due within 30 days. Current Year Prior Year Cash and cash equivalents 639,780 572,330 Accounts receivable 4,750,000 3,820,000 940,360 1,283,440 8,180,100 11,000,000 6,176,000 8,280,700 Inventory Total current assets 8,200,030 11,120,020 7,900,300 8,469,900 Total assets Total current liabilities Total liabilities Calculate the following: a. Current ratios as of the end of the current and prior year. (Round your answers to 2 decimal places.) Current Year Prior Year Current Ratio b. Calculate the receivables turnover ratio for the current year. (Round your answer to 2 decimal places.) Receivables Turnover

Answer 1

a)	Current Ratio = Current Assets / Current Liabilities
			Current Year	Prior Year
		Current Asset	8200030	8180100
		Current Liabilities	7900300	6176000
		Current Ratio	1.04	1.32
b)	Account Receivable Turnover = Sales / Average Account Receivables
	=$9870/ [(4750000+3820000)/2]
	=$13300300/4285000
	3.10
c)	Average Collection period = 365/ Account Receivables turnover
	=365/3.10
	117.74	days
d)	Inventory Turnover Ratio = Cost of goods sold / average inventory
	=$8915195/[(940360+1283440)/2]
	=$8915195/1111900
	8.02
e)	Days to sales = 365/ inventory turnover ratio
	=365/8.02
	=45.51 days
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