Question

1. It takes Ryan's Drug Store an average of 40 days to sell its inventory and 24 days to collect its accounts receivable. The firm has sales of $491,600 and costs of goods sold of $407,300. What is the accounts receivable turnover rate?

2.

A common-size income statement:
I. expresses all values as a percent of total assets.
II. should reflect a relatively constant cost of goods sold unless a firm changed the percent that it uses to mark up the wholesale price to get the retail price.
III. expresses net income as 100 percent.
IV. can be used to compare the performance of a firm both over time and against its industry.

		I, II, and III only
		II and IV only
		I and III only
		III and IV only
		II, III, and IV only

3.

Which one of the following actions will increase the internal growth rate of a firm, all else held constant?

		a decrease in the return on assets
		a decrease in the net income
		a decrease in the return on equity
		an increase in the dividend payout ratio
		an increase in the retention ratio

Answer 1

1. accounts receivable turnover rate=Sales/accounts receiavbles

Accounts receiavble days=(accounts receiavbles/sales)*365

24=(accounts receiavbles/491,600)*365

accounts receiavbles=(24*491600)/365=32324.38

accounts receivable turnover rate=491600/32324.38=15.21

2. II and IV are correct

income statement are expressed as percenatge of Sales and Sales is expressed in 100%, not the Net Income

3. internal growth rate of firm=Retention ratio*Return on asssets

An increase in the retention ratio increases the internal growth rate of firm