Couble West Suplers (WS) reparted sales for the year at 5240,00, al on crett The

Question

Couble West Suplers (WS) reparted sales for the year at 5240,00, al on crett The average grass pront percenrage was 40 percent on sales Accaunt balances falkw Acccunts racslvable inat) Inventory Begiming Ending S 40,000 S 50000 55,000 3500O Required: 1. Compute the following tumover ratics. (Round your answers to 1 decimal place.) 2. By dviding 355 by your reios from roquirement 1, calculae the awcrage days to colect reconablcs and the avcrags days to sel Inventory. (Use 365 days In a year Do not round intermediate calculations, Round turnover ratio calculation and final answers to 1 decimal place.) AveraJ& Daya to Collect Avaraa Daya to Sall days days

Explanation / Answer

Part A

Receivables turnover ratio = sales / average accounts receivables = 240000/((40000+50000)/2) = 5.3

Inventory turnover ratio = cost of goods sold/ average inventory = (Sales*(1-gross profit margin))/average inventory =(240000*(1-40%))/((55000+35000)/2)) = 3.2

PART B

Average days to collect = 365/ Receivables turnover ratio = 365/5.3 = 68.9 days

Average days to sell = 365/ Inventory turnover ratio = 365/3.2 = 114.1 days

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