Question

The following information ($ in millions) comes from the annual report of Velvo Co. for the year ending December 31, 2022:

	Year ended December 31, 2022
Net sales	$7,949
Cost of goods sold	4,767
Sales, general and administrative	1,909
Interest expense	416
Profit before tax	857
Net profit	$458

	December 31, 2022	December 31, 2021
Cash and cash equivalents	$975	$64
Receivables, net	1,010	664
Inventories	1,055	519
Land, buildings, and equipment at cost, net	13,500	3,844
Total assets	$16,540	$5,091
Total current liabilities	$5,747	$2,209
Long-term debt	5,591	2,221
Total liabilities	$11,338	$4,430
Total shareholders' equity	$5,202	$661

1. Compute the profit margin on sales for Velvo Co. for the year 2022.
2. Compute the receivables turnover ratio for Velvo Co. for the year 2022.
3. Compute the inventory turnover ratio for Velvo Co. for the year 2022.
4. Compute the asset turnover ratio for Velvo Co. for the year 2022.

5. Compute the average collection period for Velvo Co. for the year 2022.
6. Compute the average days in inventory for Velvo Co. for the year 2022.

7. Compute the return on assets for Velvo Co. for the year 2022.

8. Compute the return on shareholders' equity for Velvo Co. for the year 2022.

Ims/quizzing/user/attempt/quiz_start_frame auto.d21/ou=2132424&isprvedre&q=3379266&c. Classiteds Gosp Meal Helper School Shopping Soon TV/Radio WE Trwel Goals work Assignment ime Taken:0:00:42 Jesdrenia George: Attempt 2 х $7.949 Net sales Cost of goods sold Sales, general and administrative Interest expense Profit before tax Net profit 4,767 1,909 416 857 $458 December 31 2022 $975 December 31 2021 $64 664 Cash and cash equivalents Receivables, net Inventories Land, buildings and equipment at cost, net Total assets 1,010 1055 519 3,844 13,500 $16 540 1 $5,091 Total current liabilities Long-term debt Total liabilities $5,747 5.591 $11,338 $5,202 $2,209 2,221 $4,430 $661 Total shareholders' equity RI 9 9/17/a

Answer 1

Hope this will be helpful to you
1) Gross Profit Margin on Sales = Net Sales-COGS/ sales x 100 = ($ 7949-$ 4767)/$ 7949 x 100 = 40% Net Profit Margin on sales = Net Income/Net sales x 100 $ 458/$ 7949 x 100 = 5.76 % 2) Receivables Turnover Ratio = Net credit sales / Average Accounts Receivables = $ 7949* /837* = 9.497 (9.5 Apprx) Note-1: It is assumed that all sales are credit sales. 2: Average accounts Receivables = Opening balance+ Closing Balance/2 =($ 664+ $ 1010)/2 =$ 837. 3) Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory = $ 4767/ $787* = 6.0572. Note: Average Inventory = Opening balance+ Closing Balance/2 =($ 519+ $ 1055)/2 =$ 787. 4) Asset Turnover Ratio = Net sales/Average Total Assets = $ 7949/ $ 10815* 0.735. Note: Average Total Assets = Opening balance+ Closing Balance/2 =($ 5091+$ 16540)/2 =$ 10815.

5) Average Collection period = 365 days/ Account Receivable Turnover Ratio =365/9.5*. = 38.5 Days ( Approx 39 Days). Note: Account Receivable Turnover Ratio is calculated above in (2). 6) Average Days in Inventory = 365 days/ Inventory Turnover Ratio = 365/6.0572*. = 60 Days. Note: Inventory Turnover Ratio is calculated above in (3). 7) Return On assets Net Income/Average Total assets = $ 458 / 10815* x 100 = 4.235 %. Note: Average Total Assets is calculated above in (4). It can be calculated In other way as below, ROA = ( Net Income+ Interest Expense(1-Tax Rate))/Average Total Assets. ($ 458+$ 416 (1-0.4655 *))/$ 10815 x 100 = 6.3% . Tax Rate = (Net Profit before tax-Net Profit After Tax)/Net Profit Before Tax =($ 857-$ 458) /$ 857 x 100 -46.55%. 8) Return on Equity = Net Income Available to Equity Shareholders/Shareholders Equity = $458 / 2931* x 100 = 15.62 %. Note: Average Shareholder Equity = Opening balance+ Closing Balance/2 =($ 661+$ 5202)/2 =$ 2931.