Question

Exercise 4-26 (Algo) Evaluating efficiency of asset management [LO4-10] The 20 21 Income statement of Anderson Medical Supply Company reported net sales of $12 million cost of goods sold of $6.5 million and net income of $885,000. The following table shows the company's comparative balance sheets for 2021 and 2020 ($ in thousands) 2021 2020 $ $ 720 820 640 1.040 1.250 4. 100 1 160 2.0 20 $2.020 $6,070 Assate Cash Accounts receivable Inventory Property, plant, and equipment (net) Total assets Liabilities and shareholders' equity Current liabilities Bonds payable Conmon stock Retained earnings Total liabilities and shareholders' equity $1,300 2.050 2.700 980 $1,170 2.050 2,700 450 $7.030 $6,970 Required: ..Calculate Anderson's turnover ratios for 2021. (Use 365 days a year. Round your answers to 2 decimal places.) times times Inventory turnover ratio Receivables turnover ratio Average collection period Asset turnover ratio times

Answer 1

Answer- 1)- Inventory turnover ratio for 2021 = Cost of goods sold/Average inventory

= $6500/($1160+$1250/2)

= $6500/$1205

= 5.39 times

2) Accounts receivable turnover ratio for 2021 = Net credit sales/Average accounts receivable

= $12000/($670+$1040)/2

= $12000/$855

= 14.03 times

3)- Average collection period for 2021 = 365 days/ Accounts receivable turnover ratio

= 365 days/14.03

= 26.02 days

4)- Asset turnover ratio =Net sales/Average Total assets

=$12000/($6370+$7030)/2

=$12000/$6700

=1.79 times