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Simon Company’s year-end balance sheets follow.

At December 31	Current Yr					1 Yr Ago			2 Yrs Ago
Assets
Cash		$	32,717			$	38,243		$	38,665
Accounts receivable, net			89,800				62,300			50,400
Merchandise inventory			114,500				84,000			51,000
Prepaid expenses			10,536				10,039			4,296
Plant assets, net			296,104				274,088			238,539
Total assets		$	543,657			$	468,670		$	382,900
Liabilities and Equity
Accounts payable		$	138,078			$	80,789		$	51,554
Long-term notes payable secured by mortgages on plant assets			104,252				109,950			86,313
Common stock, $10 par value			162,500				162,500			162,500
Retained earnings			138,827				115,431			82,533
Total liabilities and equity		$	543,657			$	468,670		$	382,900

The company’s income statements for the Current Year and 1 Year Ago, follow. Assume that all sales are on credit:

For Year Ended December 31	Current Yr						1 Yr Ago
Sales				$	706,754					$	557,717
Cost of goods sold	$	431,120					$	362,516
Other operating expenses		219,094						141,102
Interest expense		12,015						12,827
Income tax expense		9,188						8,366
Total costs and expenses					671,417						524,811
Net income				$	35,337					$	32,906
Earnings per share				$	2.17					$	2.02

(1-a) Compute days' sales uncollected.
(1-b) For each ratio, determine if it improved or worsened in the current year.

Compute days' sales uncollected.

	Days' Sales Uncollected Choose Numerator: / Choose Denominator: x Days = Days' Sales Uncollected / x = Days' Sales Uncollected Current Yr: / x = days 1 Yr Ago: / x = days

For each ratio, determine if it improved or worsened in the current year.

	Days' sales uncollected

(2-a) Compute accounts receivable turnover.
(2-b) For each ratio, determine if it improved or worsened in the current year.

Compute accounts receivable turnover.

	Accounts Receivable Turnover Choose Numerator: / Choose Denominator: = Accounts Receivable Turnover / = Accounts receivable turnover Current Yr: / = times 1 Yr Ago: / = times

• For each ratio, determine if it improved or worsened in the current year.

  	Accounts receivable turnover

3-a) Compute inventory turnover.
(3-b) For each ratio, determine if it improved or worsened in the current year.

Compute inventory turnover.

	Inventory Turnover Choose Numerator: / Choose Denominator: = Inventory Turnover / = Inventory turnover Current Yr: / = times 1 Yr Ago: / = times

For each ratio, determine if it improved or worsened in the current year.

	Inventory turnover

(4-a) Compute days' sales in inventory.
(4-b) For each ratio, determine if it improved or worsened in the current year.

Compute days' sales in inventory.

	Days’ Sales In Inventory Choose Numerator: / Choose Denominator: x Days = Days’ Sales In Inventory / x = Days’ sales in inventory Current Yr: / x = days 1 Yr Ago: / x = days

For each ratio, determine if it improved or worsened in the current year.

	Days’ sales in inventory

Answer 1

1-a
Days Sales Uncollected = Accounts Receivable / Net Sales x 365
Current Year = $89800 / 706754 x 365 = 46.28 days
1 yr ago = $62300 / $557717 x 365 = 40.77 days

This ratio worsened over the year since Days Sales Uncollected increased.

2-a
Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Current Year = $706754 / $76050 = 9.29 times
Average Accounts Receivable = ($89800+62300)/2 = $76050

1 yr ago = $557717 / $56350 = 9.90 times
Average Accounts Receivable = ($62300+50400)/2= $56350

The ratio worsened since the ratio has decreased over the year

3-a
Inventory Turnover = Cost of Goods Sold / Average Inventory
Current Year = $431120 / $99250 = 4.34 times
Average Inventory = ($114500+84000)/2 = $99250

1 yr ago = $362516 / $67500 = 5.37 times
Average Inventory = ($84000+51000)/2 = $67500

The ratio has worsened since it has decreased over the year

4-a
Days Sale in Inventory = Inventory / Cost of Goods Sold x 365
Curent Year = $114500 / $431120 x 365 = 96.94 days
1 yr ago = $84000 / $362516 x 365 = 84.58 days

The Ratio has worsened since the ratio has increased over the year