Question

Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company's common stock at the end of this year was $18. All of the company's sales are on account

Answer 1

Answer- 1)- Accounts receivable turnover = Sales on account /Average accounts receivable

=$79000/ ($9100+$12300)/2

=$79000/$10700

= 7.38 times

2)- Average collection period =52.14 days.

Explanation- Average collection period = 365 days/Accounts receivable turnover

= 365 days/7 times

= 52.14 days

3)-Inventory turnover = Cost of goods sold/Average inventory*

= $52000/( $8200+$9700)/2

= $52000/$8950

= 5.81times

4)- Average sale period =60.83 days.

Explanation- Average sale period = 365 days/Inventory turnover

= 365 days/ 6 times

= 60.83 days

5)- Operating cycle =113.00 days.

Explanation- Operating cycle = Average sale period + Average collection period

= 52 days+ 61 days

=113.00 days

6)- Total assets turnover ratio = Turnover/Average assets

= $79000/($45960+$50280)/2

= $79000/$48120

= 1.64 times