Question

Calculate the following ratios for 2015 and show the steps involved:

a) Inventory turnover ratio

b) average days in inventory

c) receivables turnover ratio

d) average collection period

e) asset turnover ratio

f) profit margin on sales

g) return on assets

h) return on shareholders equity

i) equity multiplier

j) return on shareholders equity using the Du Port framework

Note: See attached balance sheet and income statement below as reference

Answer 1

1 . Inventory turnover ratio = cost of goods sold / average inventory

= 59,181,749 / 14,451,330

= 4.09

2 . Average days in inventory = 365 / Inventory turnover

= 365 / 4.09

= 89.24

3 .Reciavble turnover ratio = net credit sales / average accounts recievable

= 9,021,718 / 5,187,820

= 1.74

4 . Average collection period = 365/ average recivable turnover

= 365/1.74

= 209

5 . Assets turnover ratio = total sales / average total assets

= 94,676,398 / 204,177,912

= 0.46

6.Profit margin on sales = Gross profit / revenue * 100

= 35,494,649 / 94,676,398 * 100

= 37.5 %

7 . Return on assets = net income / average total assets

= 35,494,649 / 204,177,912

= 0.17

8 . Return on shareholders equity = earnings after tax / total shareholder equity * 100

= 20,953,913 / 148,017,133*100

=14.15

9 . equity multiplier = Total assets / total shareholders equity

=203,662,569 / 148,017,133

= 1.37