Question

JPJ Corp has sales of $ 1.05 ​million, accounts receivable of $ 52,000​, total assets of $ 5.13 million​ (of which $ 2.76 million are fixed​ assets), inventory of $ 154,000​, and cost of goods sold of $ 603,000. What is​ JPJ's accounts receivable​ days? Fixed asset​ turnover? Total asset​ turnover? Inventory​ turnover?

Answer 1

Solution :

Calculation of Accounts Receivable days :

The formula for calculating the Accounts Receivable days is

Accounts Receivable days = ( Accounts receivable / Sales ) * 365

As per the information given in the question we have

Accounts receivable = $ 52,000   ;         Sales = $ 1,050,000

Thus applying the above values in the formula we have

= ( $ 52,000 / $ 1,050,000 ) * 365

= 18.0762

= 18.08 days ( when rounded off to two decimal places )

Thus the Accounts Receivable days is = 18.08 days

Calculation of Fixed Asset Turnover ratio :

The formula for calculating the Fixed Asset Turnover ratio is

= Sales / Fixed Assets

As per the information given in the question we have

Sales = $ 1,050,000    ;         Fixed Assets = $ 2,760,000

Thus applying the above values in the formula we have

= $ 1,050,000 / $ 2,760,000

= 0.3804

= 0.38 ( when rounded off to two decimal places )

Thus the Fixed Asset Turnover ratio is = 0.38

Calculation of Total Asset Turnover ratio :

The formula for calculating the Total Asset Turnover ratio is

= Sales / Total Assets

As per the information given in the question we have

Sales = $ 1,050,000    ;         Total Assets = $ 5,130,000

Thus applying the above values in the formula we have

= $ 1,050,000 / $ 5,130,000

= 0.2047

= 0.20 ( when rounded off to two decimal places )

Thus the Total Asset Turnover ratio is = 0.20

Calculation of Inventory Turnover ratio :

The formula for calculating the Inventory Turnover ratio is

= Cost of goods sold / Inventory

As per the information given in the question we have

Cost of goods sold = $ 603,000

Inventory = $ 154,000

Thus applying the above values in the formula we have

= $ 603,000 / $ 154,000

= 3.9156

= 3.92 ( when rounded off to two decimal places )

Thus the Inventory turnover ratio = 3.92