Question

JPJ Corp has sales of $ 1.14 ​million, accounts receivable of $ 53 comma 000​, total assets of $ 5.11 million​ (of which $ 2.92 million are fixed​ assets), inventory of $ 147 comma 000​, and cost of goods sold of $ 604 comma 000. What is​ JPJ's accounts receivable​ days? Fixed asset​ turnover? Total asset​ turnover? Inventory​ turnover? If JPJ Corp is able to increase sales by 11.7 % but keep its total and fixed asset growth to only 4.2 %​, what will its new asset turnover ratios​ be?

Answer 1

Answer:

Accounts Receivable days = 365 * Accounts Receivable / Net Sales
Accounts Receivable days = 365 * $53,000 / $1,140,000
Accounts Receivable days = 16.97 days

Fixed Assets Turnover = Sales / Fixed Assets
Fixed Assets Turnover = $1,140,000 / $2,920,000
Fixed Assets Turnover = 0.39 times

Total Assets Turnover = Sales / Total Assets
Total Assets Turnover = $1,140,000 / $5,110,000
Total Assets Turnover = 0.22 times

Inventory Turnover = Cost of Goods Sold / Inventory
Inventory Turnover = $604,000 / $147,000
Inventory Turnover = 4.11 times

Effect of Increase in Sales by 11.7% and growth in Total and Fixed assets by 4.20%:

Proposed Sales = $1,140,000 * 1.117 = $1,273,380
Proposed Fixed Assets = $2,920,000 * 1.042 = $3,042,640
Proposed Total Assets = $5,110,000 * 1.042 = $5,324,620

Fixed Assets Turnover = Sales / Fixed Assets
New Fixed Assets Turnover = $1,273,380 / $3,042,640
New Fixed Assets Turnover = 0.42 times

Total Assets Turnover = Sales / Total Assets
New Total Assets Turnover = $1,273,380 / $5,324,620
New Total Assets Turnover = 0.24 times