Question

The 2021 income statement of Anderson Medical Supply Company reported net sales of $12 million, cost of goods sold of $5.5 million, and net income of $835,000. The following table shows the company's comparative balance sheets for 2021 and 2020: ($ in thousands) 2021 2020Assets Cash$440 $520 Accounts receivable 840 570 Inventory 1,250 1,050 Property, plant, and equipment (net) 3,100 2,820 Total assets$5,630 $4,960 Liabilities and shareholders’ equity Current liabilities$1,100 $970 Bonds payable 1,550 1,550 Common stock 1,700 1,700 Retained earnings 1,280 740 Total liabilities and shareholders' equity$5,630 $4,960 Required:Calculate Anderson's turnover ratios for 2021. (Use 365 days a year. Round your answers to 2 decimal places.)Inventory turnover ratio timesReceivables turnover ratio timesAverage collection period days Asset turnover ratio times

Answer 1

Inventory turnover ratio = cost of goods sold / average inventory = $5,500,000 / [($1,250,000 + $1,050,000)/2] = 4.78 times

Receivables turnover ratio = net sales / average accounts receivable = $12,000,000 / [($840,000 + $570,000)/2] = 17.02 times

Average collection period days = 365 / receivables turnover ratio = 365 / 17.02 = 21.45 days

Asset turnover ratio = net sales / average total assets = $12,000,000 / [($5,630,000 + $4,960,000)/2] = 2.27 times