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The following selected information from the comparative financial statements of Elly Company for the year ended...

The following selected information from the comparative financial statements of Elly
Company for the year ended December 31:
Year 2 Year 1
Accounts Receivable (net)
P175,000 P200,000
Inventory
130,000 150,000
Total Assets
1,100,000 800,000
Current Liabilities
140,000 110,000
Long-term debt
410,000 300,000
Net credit sales
800,000 700,000
Cost of goods sold
600,000 530,000
Interest expense
40,000 25,000
Income tax expense
60,000 29,000
Net Income
150,000 85,000
Instructions: Answer the following questions relating to the year ended December 31, year 2.
Show computations.
1. The inventory turnover ratio for Year 2 is _________________.
2. The number of times interest earned ratio in Year 2 is ________________.
3. The receivables turnover ratio for Year 2 is ______________.
4. The return on assets ratio for Year 2 is _______________.

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Answer #1

Inventory turn over ratio Cost of Goods sold/ Average Inventory Cost of Goods sold 600,000 Average inventory Opening inventory+Closing Inventory /2 Average inventory 150,000+130,000/2 140,000 Inventory turn over ratio 600,000 140,000 Inventory turn over ratio 4.28 2 Interest earned ratio Earning Before Interest and tax/Total Interest payable EBIT 150,000 Total Interest payable 40,000 Interest earned ratio 150,000/40,000 Interest earned ratio-3.75 times 3 Receivable Turn over ratio Net value of credit sales/ Average Account receivable Net value of credit sales 800,000 Average Account Receivable Opening Receivable + Closing Receivable /2 Average Account Receivable 200,000 +175,000/2 Average Account Receivable 187,500 Receivable Turn over ratio 800,000/187,500 4.26

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