Question

Markus Company’s common stock sold for $2.00 per share at the end of this year. The company paid a common stock dividend of $0.42 per share this year. It also provided the following data excerpts from this year’s financial statements:     

	Ending Balance		Beginning Balance
Cash	$	30,500	$	46,000
Accounts receivable	$	52,000	$	45,000
Inventory	$	49,300	$	52,000
Current assets	$	131,800	$	143,000
Total assets	$	353,000	$	318,200
Current liabilities	$	52,500	$	37,500
Total liabilities	$	98,000	$	88,200
Common stock, $1 par value	$	111,000	$	111,000
Total stockholders’ equity	$	255,000	$	230,000
Total liabilities and stockholders’ equity	$	353,000	$	318,200

	This Year
Sales (all on account)	$	585,000
Cost of goods sold	$	339,300
Gross margin	$	245,700
Net operating income	$	75,500
Interest expense	$	4,500
Net income	$	49,700

Find:

accounts receivable turnover

average collection period

inventory turnover

average sale period

operating period

total asset turnover

times interest earned ratio

Answer 1

Accounts receivable turnover	12.06 times
Average Collection Period	30.27 days
Inventory Turnover	6.70 times
Average Sales Period	54.48 days
Operating Period	84.75 days
Total Asset turnover ratio	1.74 times
Times interest earned ratio	16.78 times

1. Calculation of Accounts receivable turnover

Accounts receivable turnover = Net Sales / Average accounts receivable

Average accounts receivable = ( Beginning Balance + Ending Balance ) / 2

= ( 45000 + 52000 ) / 2 = $ 48500

Net Sales = $ 585000

Accounts receivable turnover = $ 585000 / $ 48500 = 12.06 times

2. Calculation of Average Collection Period

Average Collection Period = 365 days /  Accounts receivable turnover

= 365 / 12.06 = 30.27 days

3. Calculation of Inventory Turnover

Inventory Turnover = Cost of Goods Sold / Average Inventory

Cost of Goods Sold = $ 339300

Average Inventory = ( Beginning Inventory + Ending Inventory ) / 2

= ( 52000 + 49300 ) / 2 = $ 50650

Inventory Turnover = $ 339300 / $ 50650 = 6.70 times

4. Calculation of Average Sales Period

Average Sales Period = Days in the year / Inventory Turnover

= 365 days / 6.70 = 54.48 Days

5. Calculation of Operating Period

Operating Period = Average Collection Period + Average Sales Period

= 30.27 + 54.48 = 84.75 Days

6.Calculation of Total Asset turnover ratio

Total Asset turnover ratio = Total Sales / Average Total Assets

Average Total Assets = ( Beginning Assets + Ending Assets ) / 2

= ( 318200 + 353000 ) / 2 = $ 335600

Total Sales = $ 585000

Total Asset turnover ratio = $ 585000 / $ 335600 = 1.74 times

7.Calulation of Times interest earned ratio

Times interest earned ratio = Net Operating Income / Interest Expense

Net Operating Income = $ 75500

Interest Expense = $ 4500

Times interest earned ratio = $ 75500 / $ 4500 = 16.78 times

Kindly give a positive rating if you are satisfied with the answer.