Question

JPJ Corp has sales of $1.29 million, accounts receivable of $46,000, total assets of $5.17million(of which $3.19 million are fixed assets), inventory of $155,000, and cost of goods sold of $596,000. What are 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 = $ 46,000   ;   Sales = $ 1.29 Million = $ 1,290,000

Applying the above Information in the formula we have

= ( $ 46,000 / $ 1,290,000 ) * 365

= 0.035659 * 365

= 13.0155

= 13.02 days ( when rounded off to two decimal places )

Thus the Accounts Receivable Days = 13.02 days

Calculation of Fixed Asset Turnover :

The formula for calculating the Fixed Asset Turnover is

Fixed Asset Turnover = Sales / Fixed Assets

As per the information given in the question we have

Sales = $ 1.29 Million = $ 1,290,000   ;   Fixed Assets = $ 3.19 Million = $ 3,190,000

Applying the above Information in the formula we have

= $ 1,290,000 / $ 3,190,000

= 0.4044

= 0.40 ( when rounded off to two decimal places )

Thus the Fixed Asset Turnover = 0.40

Calculation of Total Asset Turnover :

The formula for calculating the Total Asset Turnover is

Total Asset Turnover =Sales / Total Assets

As per the information given in the question we have

Sales = $ 1.29 Million = $ 1,290,000   ;   Total Assets = $ 5.17 Million = $ 5,170,000

Applying the above Information in the formula we have

= $ 1,290,000 / $ 5,170,000

= 0.2495

= 0.25 ( when rounded off to two decimal places )

Thus the Total Asset Turnover = 0.25

Calculation of Inventory Turnover :

The formula for calculating the Inventory Turnover is

Inventory Turnover = Cost of Goods Sold / Inventory

As per the information given in the question we have

Cost of goods sold = $ 596,000   ; Inventory = $ 155,000

Applying the above Information in the formula we have

= $ 596,000 / $ 155,000

= 3.8452

= 3.85 ( when rounded off to two decimal places )

Thus the Inventory Turnover = 3.85