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The following information for Vision Company is given: 2016 Sales 9,000 Cost of goods sold 1,500...

The following information for Vision Company is given:

	2016
Sales	9,000
Cost of goods sold	1,500
Accounts receivable	1,000
Inventory	250

Calculate the Accounts Receivable Turnover, Inventory Turnover and Day’s Sales in Inventory for 2016.

Calculate Day’s Sales in Inventory for 2016. What this ratio attempt to measure?

Calculate the Day’s Sales in Receivables for 2016.

(1 mark)

How long did it take on average for credit customers to pay off their accounts during the past year?

Expert Solution

(1) Day Sales in Inventory is the average number of days that is taken by company to sell its goods. If it is higher in days, then it means company is unable to manage its inventory properly.

Its formula is 365*average inventory/cost of goods sold

Given inventory = 250

Cost of goods sold = 1,500

Day sales in Inventory = 365*250/1500 = 61 days.

Inventory turnover ratio = cost of goods sold/ inventory

= 1500/250

= 6 times

Day sales in Receivables is the average number of days debtors take to pay off the Money for the goods they purchased.

The company should be able to manage its debtors properly.

It is calculated as 365*accounts receivables/credit sales

Given accounts receivables = 1,000

Sales = 9,000

Debtors days = 365*1000/9000 = 41 days

On an average it is taking 41 days for the credit customers to pay off their accounts.

Assumptions:

I madean assumption that number of days in an year is 365 days.

The given sales are all on credit basis.

jeff jeffy answered 1 year ago

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