Question

Harmony Corporation reported these​ figures:

​(Click the icon to view the balance​ sheet.)                      

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​(Click the icon to view the income​ statement.)

Harmony Corporation has 2,000,000 shares of common stock outstanding. Its stock has traded recently at $ 33.30 per share. You would like to gain a better understanding of Harmony Corporation​'s financial position. Assume all sales are on credit.Read the requirement

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.

a. Inventory turnover

Enter the formula on the first​ line, then calculate the inventory turnover on the next line. ​(Enter amounts in thousands as provided to you in the problem statement. Round your answer to one decimal​ place.)

	/		=	Inventory turnover
	/		=

DATA

BALANCE SHEET

Harmony Corporation
Balance Sheets
December 31, 2017 and 2016
(amounts in thousands)
	2017	2016
Assets
Current assets:
Cash	$3,110	$2,200
Accounts receivables	2,500	2,420
Inventory	2,000	1,400
Other current assets	1,850	2,280
Total current assets	$9,460	$8,300
Other assets	23,000	16,500
Total assets	$32,460	$24,800
Liabilities
Total current liabilities	$11,000	$10,000
Long-term liabilities	11,460	9,800
Total liabilities	$22,460	$19,800
Stockholders' equity
Total common stockholders' equity	10,000	5,000
Total liabilities and equity	$32,460	$24,800

DATA

INCOME STATEMEMT

Harmony Corporation

Income Statement

For the Year Ended December 31, 2017

(amounts in thousands)

2017

Sales revenue

$14,965

Less: Cost of goods sold

5,270

Gross profit

$9,695

Less: Operating expenses

7,395

Operating income

$2,300

Less: Interest expense

100

Income before income taxes

$2,200

Less: Income tax expense

400

Net income

$1,800

REQUIREMENT

Calculate the following ratios for

20172017

and interpret the​ results:

a.	Inventory turnover
b.	​Days' sales in receivables
c.	​Acid-test ratio
d.	​Times-interest-earned
e.	Gross profit percentage
f.	Operating income percentage
g.	Return on​ stockholders' equity
h.	Earnings per share
i.	​Price/earnings ratio

Answer 1

a. Inventory Turnover Ratio
Detail
Average Inventory ( Opening Inventory+ Closing Inventory)/2	$1,700.00
( 2000+1400)/2
Sales Revenue	$14,965.00
Inventory Turnover ratio ( Sales/ Inventory)	8.8
b. Days sales in receivable
Detail
Inventory Turnover Ratio	8.80
No. of days in a year	365
No. of days sales in receivable	41.48
(No. of days in a year/ Inventory Turnover ratio)
c. Acid test ratio
Detail
Liquid Asset=Total Current Asset - inventory	$7,460.00
Current liability	$11,000.00
Acid test ratio	0.68
( Liquid Asset/ Current Liability)
d. Time Interest earned
Detail
Operating Income	$2,300.00
Interest Expense	$100.00
Times Interst Earned	23.00
( Operating Income/ Interest Expense