By NEAS - 8/1/2018 9:44:07 PM
FA Module 7 Turnover ratios practice exam questions
(The attached PDF file has better formatting.)
A firm’s financial statements show
Calendar Year 20XX-1 Calendar Year 20XX
Net revenue 541 547
Cost of goods sold 270 238
Net income 117 141
December 31, 20XX-1 December 31, 20XX
Accounts receivable 85 91
Inventory
113 144
Accounts payable 48 59
All purchases and sales are on credit.
Question 7.2: Receivables turnover
What is the receivables turnover in 20XX?
Answer 7.2: 547 / ( (85 + 91) / 2) = 6.216
(receivables turnover = credit sales / average accounts receivable)
Question 7.3: Days of sales outstanding (DSO)
What is the number of days of sales outstanding (DSO) in 20XX?
Answer 7.3: 365 / 6.216 = 58.72
(days of sales outstanding = days in year / receivables turnover)
Question 7.4: Inventory turnover
What is the inventory turnover in 20XX?
Answer 7.4: 238 / ( (113 + 144) / 2) = 1.852
(inventory turnover = cost of goods sold / average inventory)
Question 7.5: Days of inventory on hand (DOH)
What is the number of days of inventory on hand (DOH) in 20XX?
Answer 7.5: 365 / 1.852 = 197.08
(days of inventory on hand = days in year / inventory turnover)
Question 7.6: Purchases from suppliers
What is the purchases of inventory from suppliers in 20XX?
Answer 7.6: 238 + (144 – 113) = 269
(purchases of inventory from suppliers = cost of goods sold + Δ(inventory) )
Question 7.7: Payables turnover
What is the payables turnover in 20XX?
Answer 7.7: 269 / ( (48 + 59) / 2) = 5.028
(payables turnover = purchases of inventory from suppliers / (average accounts payable) )
Question 7.8: Days of payables
What is the number of days of payables in 20XX?
Answer 7.8: 365 / 5.028 = 72.59
(days of payables = days in year / payables turnover)
Question 7.9: Cash conversion cycle
What is the cash conversion cycle in 20XX?
Answer 7.9: 58.72 + 197.08 – 72.59 = 183.21
(cash conversion cycle = days sales outstanding + days inventory on hand – number of days of payables)
|
|