ABC Fitness: Calculate average collection period, inventory turnover, asset turnover
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USING THE ATTACHED ANNUAL INFORMATION, CALCULATE THE ASSET ACTIVITY RATIOS FOR THE END OF 2005.
1. AVERAGE COLLECTION PERIOD 2. INVENTORY TURNOVER 3. TOTAL ASSET TURNOVER.
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Solution Summary
The 270 word solution shows the formulas, works out the ratios and explains the uses for each.
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1. Average Collection Period = 365 / (Credit Sales / Accounts Receivable ) =>
365 / (2,004.016 / 55.514) = 10.11 days
2. Inventory Turnover = COGS / Inventory => 1,446.733 / 141.35 = 10.24
3. Total Asset Turnover = Sales / Total Assets => 2,004.016 / 1,117.96 = 1.79
Turnover ratios are logical once you figure out the terminology. "COGS" or ...
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