Question

Lendell Company has these comparative balance sheet data: Additional Information for 2017: Net income was $25,000. Sales on account were $375,000. Sales returns and allowances amounted to $25,000. Cost of goods sold was $198,000. Net cash provided by operating activities was $48,000. Capital expenditures were $25,000, and cash dividends were $10,000. Compute the following ratios at December 31, 2017. (Round current ratio to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8. Use 365 days for calculation.) Current ratio.:1 Accounts receivable turnover. times Average collection period. days Inventory turnover. times Days in inventory. days Free cash flow. $

Answer 1

The Current ratio equals 2.9, the Accounts receivable turnover equals 5.77 and Average collection period equals 63 days.

What is Current ratio?

= Current Assets / Current Liabilities

= 145,000 / 50,000

= 2.9

What is Accounts receivable turnover?

= Net sales / Average Accounts Receivable

= 375,000 / )(70,000 + 60,000) / 2)

= 5.76923076923

= 5.77

What is Average collection period?

= 365 Days /Average Receivable Turnover ratio

= 365 / 5.77

= 63.2582322357

= 63 days

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