MGT410

TB1410_0001ANSWERED x

TB1 – Textbook Problems

Please complete the following textbook problems and upload your answers and work documenting how you arrived at your answers. You can use an Excel spreadsheet or Word document.

1. Chapter 2, Problem 18, Page 36

2. Chapter 1, Scientific Equipment Manufacturing (A problem created by Dr. Bober)

Please consider the following financial data from the past year for Scientific Equipment Manufacturing:

Gross Income…………………… $32,280,000

Total Sales……………………….. $30,126,000

Total Credit Sales………………. $22,560,000

Net Income………………………..   $5,400,000

Cost of Goods Sold…………….  $18,000,000

Total Assets……………………….  $16,200,000

Average Inventory……………….    $4,525,000

Average Receivables…………..    $6,275,000

QUESTIONS:

a) Compute the receivables turnover ratio

solution

Receivables Turnover Ratio = Net credit sales/Average receivable

= $22,560,000/$6,275,000

=3.59521912

≈ 3.60 (2d.p)

Note: Net credit sales= Sales on credit -sales returns-sales allowances =$22,560,000-$0-$0= $22,560,000

b) Compute the inventory turnover ratio

solution

Inventory Turnover Ratio= cost of goods sold/average inventory

= $18,000,000/$4,525,000

= 3.97790055

≈ 3.98 (2d.p)

c) Compute the asset turnover ratio

solution

Asset turnover ratio = Net Sales/Average Total Assets

= $30,126,000/$16,200,000

= 1.85962963

≈ 1.86 (2d.p)