Answer:
a-1
Year 2 34%
Year 1 33%
a-2
Year 2 4.5
Year 1 4.0
a-3
Year 2 5.0
Year 1 6.1
b. Year 2
Explanation:
a-1. Computation for the gross profit percentage for both years using this formula
Gross profit percentage = Gross profit / Sales
Let plug in the formula
Year 2 =( $ 750,000-495,000)/$ 750,000 = 34%
Year 1 = ($ 610,000-$408,000)/$ 610,000 = 33%
a-2. Computation for the inventory turnover for both years using this formula
Inventory turnover = Cost of goods sold / Average inventory during the year
Let plug in the formula
Year 2 = 495,000 /110,000 = 4.5
Year 1 = 408,000/102,000= 4.0
a-3. Computation for the accounts receivable turnover for both years using this formula
Accounts receivable turnover = Sales (on account) / Average receivables during the year
Let plug in the formula
Year 2 = $ 750,000 /150,000 = 5.0
Year 1 = $ 610,000 /100,000 = 6.1
b. Based on the above calculation Year 2 show a positive trend.
