P 6-22.            The following data apply to items (a) and (b). Mr. Sparks, the owner of School Supplies, Inc., wants to maintain control over accounts receivable. He understands that accounts receivable turnover will give a good indication of how well receivables are being managed. School Supplies, Inc., does 70% of its business during June, July, and August. The terms of sale are 2/10,    net/60.

Net sales for the year ended December 31, 2007, and receivables balances   follow:

 

Receivables, less allowance for  doubtful

accounts of $10,000 at December 31,    2007                                                                     60,000

 

 

 

 

 

 

 

P 6-25.            Consecutive five-year balance sheets and income statements of Anne Gibson Corporation   follow:

 

Anne Gibson Corporation Balance Sheet

December 31, 2003 through December 31, 2007

 

 

Liabilities and stockholders’ equity:

Current liabilities

 

 

 

Anne Gibson Corporation Statement of Earnings

For Years Ended December 31,  2003–2007

 

 

Required           a.   Using year-end balance sheet figures, compute the following for the maximum number of years, based on the available data:

1.      Days’ sales in receivables

2.      Accounts receivable turnover

3.      Accounts receivable turnover in days

4.      Days’ sales in inventory

5.      Inventory turnover

 

6.     Inventory turnover in days

7.     Operating cycle

8.     Working capital

9.     Current ratio

10.     Acid-test ratio

11.     Cash ratio

12.     Sales to working capital

b.     Using average balance sheet figures, as suggested in the chapter, compute the following for the maxi- mum number of years, based on the available data:

1.     Days’ sales in receivables

2.     Accounts receivable turnover

3.     Accounts receivable turnover in days

4.     Days’ sales in inventory

5.     Inventory turnover

6.     Inventory turnover in days

7.     Operating cycle

8.     Working capital

9.     Current ratio

10.     Acid-test ratio

11.     Cash ratio

12.     Sales to working capital

c.      Comment on trends indicated in short-term liquidity.

Source: Materials identified as CFA Examination I, June 4, 1988, June 6, 1987, and June 6, 1988 are reproduced with per- mission from the Association for Investment Management and Research and the Institute of Chartered Financial Analysts.

 

 

 

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