Average collection period-inventory turnover ratio

Reference no: EM131016773

Using the following financial statement data, calculate the following ratios for 2009: Return on equity, current ratio, leverage ratio, times interest earned, average collection period, inventory turnover ratio, return on sales, market to book:

Snapit company
Income statment (2009)
sales	$4,000,000
Costs of goods sold	$3,040,000
Gross profit	960,000
Selling and admin. expenses	430,000
operating profit	530,000
interest expense	160,000
incomes before tax	370,000
tax expense	148,000
Net income	222,000

Balance Sheet	2009	2008
Cash	$60,000	$50,000
Accounts recievable	550,000	500,000
inventory	690,000	620,000
total current assets	1,300,000	1,170,000
Fixed assets	1,300,000	1,230,000
Total Assets	2,600,000	2,400,000

Accounts payable	270,000	250,000
Bank loan	580,000	500,000
total current liabilities	850,000	750,000
bonds payable	900,000	1,000,000
total liabilities	1,750,000	1,750,000
Common stock (25,000 shares)	250,000	250,000
Retained earnings	600,000	400,000
total liabilities and equity	2,600,000	2,400,000

Note: The common shares are trading in the stock market for $100 each

Based on your ratio analysis, if snapit company is an ice-cream store, as an investor would you be concerned over their inventory turnover or collection period ratios?

What if Snapit Company was an automobile company? how would you react to their inventory turnover or collection period ratios?

Reference no: EM131016773

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