For its most recent year a company had sales all on credit...

For its most recent year a company had Sales (all on credit) of $830,000 and Cost of Goods Sold of $525,000. At the beginning of the year its Accounts Receivable were $80,000 and its Inventory was $100,000. At the end of the year its Accounts Receivable were $86,000 and its Inventory was $110,000. Calculate (i) the inventory turnover ratio for the year (ii) accounts receivable turnover ratio for the year (iii) the average days of sales were in Accounts Receivable during the year (iv) average days of sales in Inventory during the year.

Transcript

00:01 Now in the question first of all we have to find out the inventory turnover ratio for the period now this inventory turnover ratio is cost of goods sold upon average inventory so we will write down the formula first so inventory so inventory turnover ratio is equals to cost of good sold upon average inventory now in the question the cost of good sold is been given that is 520 thousand dollars so our cost of goods sold is five hundred twenty five thousand dollars and we need to find out this average inventory now average inventory is the average of opening or we can say beginning inventory and ending inventory so this is going to be beginning inventory plus the ending inventory this total when divided by two gives us average inventory that is by two now the beginning inventory is given to be 100 ,000 and the ending inventory is given to be 110 ,000 so this summation divided by two is going to get us average inventory and that comes to one hundred five thousand dollars so finally we have the so we can now find the inventory turnover ratio so this inventory turnover ratio putting the values in this formula that is cost of goods sold which is given in the portion to be $525 ,000 and the average inventory is 105 triple zero zero so finally this is going to be five times so the inventory turnover ratio is five times in in the part two of the question we need to find out the account receivable turnover ratio and this account receivable the formula to calculate this is net credit sales upon average account receivables so this is going to be net credit sales upon average accounts now it is given in the question that all sales are on credit therefore, the net credit sales is going to be the total sales value.

02:58 So net credit sales will be the total sales that is $830 ,000.

03:06 So this is the net sales.

03:07 Now we need to find out the average account receivable...

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