The Anne Elizabeth Corporation is engaged in the business of making toys. A high percentage of its products are sold to consumers during November and December. Therefore, retailers need to have the toys in stock prior to November. The corporation produces on a relatively stable basis during the year in order to retain its skilled employees and to minimize its investment in plant and equipment. The seasonal nature of its business requires a substantial capacity to store inventory.

The gross receivables balance at April 30, 2000, was $75,000, and the inventory balance was $350,000 on this date. Sales for the year ended April 30, 2001, totaled $4,000,000, and the cost of goods sold totaled $1,800,000. The Anne Elizabeth Corporation uses a natural business year that ends on April 30.

Inventory and accounts receivable data are given in the following table for the year ended April 30, 2001.

Â	Month-End Balance
Month	Gross Receivables	Inventory
May, 2000	$ 60,000	$525,000
June, 2000	40,000	650,000
July, 2000	50,000	775,000
August, 2000	60,000	900,000
September, 2000	200,000	975,000
October, 2000	800,000	700,000
November, 2000	1,500,000	400,000
December, 2000	1,800,000	25,000
January, 2001	1,000,000	100,000
February, 2001	600,000	150,000
March, 2001	200,000	275,000
April, 2001	50,000	400,000

Required a. Using averages based on the yearend figures, compute the following:

1. Accounts receivable turnover in days

2. Accounts receivable turnover per year

3. Inventory turnover in days

4. Inventory turnover per year

b. Using averages based on monthly figures, compute the following:

1. Accounts receivable turnover in days

2. Accounts receivable turnover per year

3. Inventory turnover in days

4. Inventory turnover per year

c. Comment on the difference between the ratios computed in (a) and (b).

d. Compute the days’ sales in receivables.

e. Compute the days’ sales in inventory.

f. How realistic are the days’ sales in receivables and the days’ sales in inventory that were computed in (d) and (e)?