Question

Sandhill Co. has these comparative balance sheet data:

Answer 1

Answer:

Consider the following calculations

Explanation:

(a)-Current Ratio

Current Ratio = Total current assets / Total current liabilities

= [Cash + A/R + Inventory] / Accounts Payables

= [$33,450 + $156,100 + $133,800] / $111,500

= $323,350 / $111,500

= 2.90

(b)-Accounts Receivables Turnover

Accounts Receivables Turnover = Net credit sales / Average accounts receivables

= [$377,100 - $27,600] / [($156,100 + $133,800)/2]

= $349,500 / $144,950

= 2.4 Times

(c)-Average collection period

Average collection period = 365 Days / Accounts Receivables Turnover

= 365 Days / 2.4 Times

= 152.1 Days

(d)-Inventory Turnover

Inventory Turnover = Cost of goods sold / Average Inventory

= $200,200 / [($133,800 + $111,500)/2]

= $200,200 / $122,650

= 1.63 Times

(e)-Days in Inventory

Days in Inventory = 365 Days / Inventory Turnover

= 365 Days / 1.63 Times

= 223.9 Days

(f)-Free Cash Flow

Free Cash Flow = Net cash provided by operating activities – Capital expenditures – Dividends paid

= $56,000 - $28,200 - $19,300

= $8,500