Purchase Solution

# Financial Ratios

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Financial Ratios:

Given below are comparative balance sheets and an income statement for the Richmond Corporation...Please see attachment for table

All sales were made on account. Cash dividends declared during the year totaled \$57, 150. Compute the following:

a) Average accounts receivable turnover
b) Average inventory turnover
i) Return on assets
j) Return on common stockholders' equity

Please see attachment for all questions

##### Solution Summary

The comparative balance sheets and income statements are examined. The inventory turnover averages are determined.

##### Solution Preview

(a)The accounts receivable turnover is determined by net sales/receivables. Since they are asking for average accounts receivable turnover, you need to use the average receivables for the period, or (90000 + 74000)/2. So the ratio would be found using:
410000/82000 = 5. This means that accounts receivable turns over 5 times a year, or every 365/5 = 73 days.
(b) Average inventory turnover is similar, but using the average inventory for the year, ...

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