Asset activity ratios
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Use the following information to answer the three questions that follow:
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
problem is attached
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Solution Summary
The Asset activity ratios (Average Collection Period, Inventory Turnover, Total Asset Turnover ) are calculated for the data given for the income statement and balance sheet of ABC Fitness Company.
Solution Preview
In the calculation of these ratios average figures are taken. Since the balance sheet is for only one year we take the figures for that year only.
1. Average Collection Period
Average collection period=Avergae accounts receivables/(Annual ...
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