Accounting

Turnover Ratios

Jim Short’s Company makes clothing for schools Sales in 2007 were $4,000,000 Assets were as follows:

Cash $100,000
Accounts receivable $800,000
Inventory $400,000
Net plant and equipment $500,000
Total Assets $1,800,000

a) Compare the following:
1 Accounting receivable turnover
2 Inventory turnover
3 Fixed asset turnover
4 Total asset turnover

b) In 2008, sales increased to $5,000,000 and the assets for that year were as follows:

Cash $100,000
Accounts receivable $900,000
Inventory $975,000
Net plant and equipment $500,000
Total Assets $2,525,000

Once again, compute the four ratios

  • c) Indicate if there is an improvement or decline in total asset turnover and based on the other ratio, indicate why this development has taken place

Solution:

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