12.6 Cumulative Questions
1) Rick's net sales decreased from $90,000 in year 1 to $45,000 in year 2 and its cost of goods sold decreased from $30,000 in year 1 to $20,000 in year 2. Using vertical analysis based on sales , what percentages would show for the decreases in cost of goods sold for the two periods (rounded to nearest tenth of a percent)? Using horizontal analysis, what would be the percentage change for sales and cost of goods sold?
2) Given the following balance sheet, calculate the following ratios for 2012:
a) current ratio
b) accounts receivable turnover
c) inventory turnover
d) debt ratio
Jessica’s Jewellery Store
Comparative Balance Sheet
For Years Ended December 31, 2012 and 2011
(in thousands)
|
2012
|
|
2011
|
Assets
|
|
|
|
Current Assets
|
|
|
|
Cash and Equivalents
|
$319
|
|
$288
|
Accounts Receivable, net
|
166
|
|
173
|
Inventory
|
437
|
|
400
|
Total Current Assets
|
922
|
|
861
|
Property, Plant and Equipment
|
377
|
|
412
|
Total Assets
|
$1,299
|
|
$1,273
|
Liabilities
|
|
|
|
Current Liabilities
|
|
|
|
Accounts Payable
|
132
|
|
144
|
Accrued Liabilities
|
90
|
|
84
|
Total Current Liabilities
|
222
|
|
228
|
Long-Term Liabilities
|
84
|
|
96
|
Total Liabilities
|
306
|
|
324
|
Stockholders’ Equity
|
|
|
|
Common Stock
|
288
|
|
255
|
Retained Earnings
|
705
|
|
694
|
Total Stockholders’ Equity
|
993
|
|
949
|
Total Liabilities and Equity
|
$1,299
|
|
$1,273
|
In addition, credit sales for 2012 were $525,000 and cost of goods sold was $1,255,500.
3) Assume that Jeanie Industries' inventory was $20,000 in 2012 and $19,000 in 2011 and cost of goods sold for 2012 was $585,000. In addition, assume that account receivables were $30,000 in 2012 and $20,000 in 2011 and credit sales were $750,000. Based on that information and an accounts payable turnover rate of 25, calculate the inventory turnover rate, accounts receivable turnover rate and the cash conversion cycle for Jeanie Industries.