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Inventory-turnover ratio

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A) The balance sheet of the first chemical plant is given in the attached file.
If annual sale is \$400,000, profit before income tax is \$200,000, and the corporate tax rate is 50%, compute the return-on-total-assets ratio and the inventory-turnover ratio.

b) Define the inventory-turnover ratio and identify its two major inconsistencies.

c) Given the following information, construct the balance sheet of a private business and calculate its owners' equity:

Accounts receivable = \$10,000
Bonds and debentures = \$600,000
Equipment = \$100,000
Cash = \$10,000
Government bonds = \$10,000
Land = \$500,000
Inventories = \$100,000
Sales = \$100,000
Annual costs of production = \$50,000
Office equipment = \$50,000
Building = \$500,000
Accrued taxes = \$15,000
Accounts payable = \$400,000

Note: If you use an Excel file for calculations, the rest of the problem should go in a MS Word file because it's hard reading words on Excel. Also, if the final results for calculations can be brought over to the Word file, that would be helpful. Please include the Excel file as well if you use it. Thanks!

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a) The balance sheet of the first chemical plant is given in the attached file.
If annual sale is \$400,000, profit before income tax is \$200,000, and the corporate tax rate is 50%, compute the return-on-total-assets ratio and the inventory-turnover ratio.

b) Define the ...

Solution Summary

This explains the nventory-turnover ratio and its two major inconsistencies

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Gross Profit Ratio, Inventory Turnover Ratio and Average Days

** Please see the attached file for the complete problem description **

The table below contains selected financial information included in the 2009 financial statements of Saks, Inc.., and Dillard's, Inc., two companies in the department store industry.

(\$ in Millions) Saks Dillards
2009 2008 2009 2008 Balance sheet:
Inventories \$ 729 \$857 \$1,374 \$1,779

Income statement
Net sales \$3,030 \$6,831
Cost of goods sold 2,062 4,828
Calculate the 2009 gross profit ratio, inventory turnover ratio, and average days in inventory for both companies. Evaluate management of each company's investments. Industry averages for these ratios are as follows:
Gross Profit 25%
Inventory turnover 2.73
Average days in inventory 134

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