ACC 301: Accounting for Non Accounting Managers

Company: Costco Accounts Receivable: 2.502 Billion Inventory: 17.907 Billion

Your SEC 10-K company should have accounts receivable and inventory, both typically large dollar values within the balance sheet.

• Who owes money to your SEC 10-K company?
• How is the inventory described?

Using the resources of our course materials, calculate and consider the concept of the financial ratios: days sales in Accounts Receivable (AR) and inventory. Due to limited information in the report, use the ending balances of inventory and accounts receivable when calculating these ratios (and not the average balance as the formulas require). This should allow you to compare this year to last year. Some companies require and analyze these values each month.

Formulas:

Days Sales in A/R = Ending Balance in Accounts Receivable/ [Sales Revenues / 365]

Days' Sales in Inventory = Ending Inventory Balance/[Cost of Goods Sold / 365]

Calculating ratios is only the first step in the analysis process. The ratios results need interpretation.

• What does the result indicate about the financial performance?
• Consider how these values are changing. Interpret these changes as positive or negative for the corporation. What can be done to counteract negative trends or continue with positive trends? What actions do you recommend management take?
• Also, relate changes in revenues and cost of goods sold values to changes in accounts receivable and inventory from year to year. Do the changes in revenues and cost of goods sold agree with the changes in accounts receivable and inventory? SEC 10K Summary. Summarize your SEC 10K project and what were the key findings you identified.