Use the following information to answer the three questions that follow:

ABC Fitness Company 000?s
 
INCOME STATEMENT  Dec. 99
 
Sales 1968.016
 
Cost of Goods Sold 1466.733
 
Gross Profit 501.283
 
Selling and Ad. Expenses 361.402
 
Depreciation 35.7
 
Operating Income (EBIT) 104.181
 
Interest Expense 34.482
 
Other Expense 14.124
 
EBT 83.823
 
Taxes 24.701
 
Net Income 59.122
 
BALANCE SHEET 000?s
 
Assets:  
 
Cash 89.469
 
Net Receivables 55.514
 
Inventories 322.433
 
Prepaids 8.775
 
Total Current Assets 476.191
 
Gross Plant & Equipment 955.661
 
Accumulated Dep 338.513
 
Net Plant & Equip 617.148
 
Other Assets 24.621
 
Total Assets 1117.96
 
Liabilities:  
 
Notes Payable 1.127
 
Accounts Payable 144.638
 
Taxes Payable 16.797
 
Accrued Expense 98.233
 
Total Current Liabilities 260.795
 
Long-Term Debt 415.138
 
Deferred Taxes 20.396
 
Total Liabilities 696.329
 
Equity:  
 
Common Stock 0.32
 
Capital Surplus 242.843
 
Retained Earnings 178.468
 
Total Equity 421.631
 
Total Liabilities and Equity 1117.96
 

Calculate, show all work, including formulae and calculations for the
following asset activity ratios for the end of 1999.

1.Average Collection Period 

2.Inventory Turnover 

3.Total Asset Turnover

Hello exep9-ga,

In order to answer the three questions you have posed, it is necessary
to have the correct formulas to perform the calculations.

1.Average Collection Period 

Collection Period = (Accounts Receivable)*(365 days )/Credit Sales

Given the information provided, that gives:

(55.514)*(365 days)/(1968.016) = 10.296 days

http://www.bizwiz.ca/average_collection_period.html


2.Inventory Turnover 

Inventory Turnover = (Cost of Goods Sold)/(Average Inventory)

(1466.733)/(322.433) = 4.5490 Inventory turns per year

http://www.accd.edu/SAC/slac/handouts/acct/2302/chpt_notes_18.htm

3.Total Asset Turnover

Total Asset Turnover = (Cost of Goods Sold) / (Total Assets)

(1466.733)/(1117.96) = 1.312 Asset turns per year

http://www.bized.ac.uk/compfact/ratios/asset3.htm


Hopefully this helps you understand how to perform the calculation of
these financial ratios. Please post a clarification request if you
have any trouble understanding the calculations above.

Cheers!

answerguru-ga