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The data presented below show actual figures for selected accounts of Potrero Company for the fiscal year ended May 31, Year 1, and selected budget
The data presented below show actual figures for selected accounts of Potrero Company for the fiscal year ended May 31, Year 1, and selected budget figures for the Year 2 fiscal year. Potrero's controller is in the process of reviewing the Year 2 budget and calculating some key ratios based on the budget. Potrero Company monitors yield or return ratios using the average financial position of the company. 5/31/Year 2 5/31/Year 1 Current assets $210,000 $180,000 Noncurrent assets 275,000 255,000 Current liabilities 78,000 85,000 Long-term debt 75,000 30,000 Common stock ($30 par value) 300,000 300,000 Retained earnings 32,000 20,000 Year 2 Operations Sales* $350,000 Cost of goods sold 160,000 Interest expense 3,000 Income taxes (40% rate) 48,000 Dividends declared and paid in Year 2 60,000 Administrative expense 67,000 *All sales are credit sales. Current Assets 5/31/Year 2 5/31/Year 1 Cash $ 20,000 $10,000 Accounts receivable 100,000 70,000 Inventory 70,000 80,000 Other 20,000 20,000 A. Calculate the following ratios for fiscal Year 2 for Potrero, Co., based on the financial statement information presented in the scenario. a. Current ratio b. Receivables turnover ratio c. Inventory turnover period
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