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Alex73 [517]
3 years ago
8

gThe following data are available for Martin Solutions, Inc. Year 2 Year 1 Sales $1,139,600 $1,192,320 Beginning inventory 80,00

0 64,000 Cost of goods sold 500,800 606,000 Ending inventory 72,000 80,000 Required: Assume a 365-day year. Determine for each year:
Business
1 answer:
Vaselesa [24]3 years ago
3 0

Answer and Explanation:

The computation is shown below;

For Year 1

Average inventory = (Beginning inventory + Ending inventory)÷ 2

= ($64,000 + $80,000) ÷ 2

= $72,000

Inventory turnover = Cost of goods sold  ÷ Average inventory

= $606,000 ÷ 72,000

= 8.4 times

Days in inventory = 365 ÷ Inventory turnover ratio

= 365 ÷ 8.4

= 43.5 days

For Year 2

Average inventory = (Beginning inventory + Ending inventory) ÷ 2

= ($80,000 + $72,000) ÷ 2

= $76,000

Inventory turnover = Cost of goods sold ÷ Average inventory

= $500,800 ÷ 76,000

= 6.6 times

Days in inventory = 365 ÷ Inventory turnover ratio

= 365 ÷ 6.6

= 55.3 days

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Answer:

Consider the following explanation.

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2) The Straddle combination with long one put and long 1 call with the same strike price X and maturity. Its payoff depends on the deviation of the strike price if the big jump either way is expected then either the put or the call expires in the money so that the moneyness(payoffs) covers all the premiums paid for the call and put and there are profits. The high jump either way guarantees a big payoff from either the put or the call.

3)In the Strangle combination there is one long call with strike price (Xc) and one long put with strike price Xp,this combination is cheaper to generate due to purchase of OTM(out of the money) options. If the big jump either way is expected then either the put or the call expires in the money so that the moneyness (payoffs) covers all the premiums paid for the call and put and there are profits. The high jump either way guarantees a big payoff from either the put or the call. It’s easier to cover all the lesser premiums paid for the call and put and generate profits with a big move.

4) The Strip combination consists of 1 call+2 put with same exercise price and maturity. If the big jump either way is expected then either the two put or the call expires in the money so that the moneyness covers all the premiums paid for the call and put and there are profits. The payoff generated by the 2 puts is much more when the stock moves downwards as compared to when the stock moves upwards. Investor is sure of the uncertain directional big jump but thinks that the probability of downward move is greater than the upward move.

5) The Strap combination consists of 2 calls+1 put with same exercise price and maturity. If the big jump either way is expected then either the 1 put or the 2 calls expires in the money so that the moneyness covers all the premiums paid for the call and put and there are profits. The payoff generated by the 2 calls is much more when the stock moves upwards as compared to when the stock moves downwards. Investor is sure of the uncertain directional big jump but thinks that the probability of upward move is greater than the downward move.

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