Homework Answers
a) Calculation of gross profit:
Gross profit= sales- cost of good sold
A/R turnover= Turnover/average AR
Average AR= (900000+1000000)/2= 950000
Turnover= 5*950000= 4750000
Inventory Turnover= cost of goods sold/average inventory
Average inventory= (1100000+1200000)= 1150000
Cost of goods sold= 4*1150000= 4600000
Gross Profit= 4750000-4600000= 150000
Gross profit= $150000
b) Calculation of A/R days
A/R days= 360/AR turnover= 360/5= 72
A/R days= 72 days
Calculation of inventory days:
Inventory days= 360/inventory Turnover= 360/4= 90
Inventory days= 90 days
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