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Asset activity ratios

ABC Fitness Company 000's
INCOME STATEMENT Dec. 99
Sales 1968.016
Cost of Goods Sold 1466.733
Gross Profit 501.283
Selling and Ad. Expenses 361.402
Depreciation 35.7
Operating Income (EBIT) 104.181
Interest Expense 34.482
Other Expense 14.124
EBT 83.823
Taxes 24.701
Net Income 59.122
BALANCE SHEET 000's
Assets
Cash 89.469
Net Receivables 55.514
Inventories 322.433
Prepaids 8.775
Total Current Assets 476.191
Gross Plant & Equipment 955.661
Accumulated Dep 338.513
Net Plant & Equip 617.148
Other Assets 24.621
Total Assets 1117.96
Liabilities
Notes Payable 1.127
Accounts Payable 144.638
Taxes Payable 16.797
Accrued Expense 98.233
Total Current Liabilities 260.795
Long-Term Debt 415.138
Deferred Taxes 20.396
Total Liabilities 696.329
Equity
Common Stock 0.32
Capital Surplus 242.843
Retained Earnings 178.468
Total Equity 421.631
Total Liabilities and Equity 1117.96
Calculate the following asset activity ratios for the end of 1999.
1. Average Collection Period
2. Inventory Turnover
3. Total Asset Turnover
After you calculate the ratios, please tell me which ratio is the most important or critical to monitor as regards to ABC Fitness, Please explain why.

Solution Preview

Sales:

Annual= 1,968.016

Per day= 5.3918 =1968.016 / 365

Cost of goods sold= 1,466.733

Inventory= 322.433

Net Receivables = 55.514

Total Assts= 1117.96

1. Average Collection Period

Average Collection period=Accounts receivables period=Avergae accounts receivables/(Annual ...

Solution Summary

Asset activity ratios (Average Collection Period, Inventory Turnover, Total Asset Turnover) have been calculated for the company.

$2.19