Use the Cartwright's Data Set to compute the following: Cartwright's, a home-improvement store chain, reported these summarized
Question:
Cartwright's, a home-improvement store chain, reported these summarized figures:
a. The rate of inventory turnover for 2017.
b. Days' sales in average receivables during 2017. Assume all sales are on credit.
Cartwright's Income Statement For the Year Ended December 31, 2017 1. 2017 34,988,900 21,766,030 13,222,870 5,088,250 8,134,620 217,800 7,916,820 1,925,750 5,991,070 6 Sales revenues Less: Cost of goods sold Gross profit Less: Operating expenses 10 Operating Income 11 Less: Interest expense 12 Income before Income taxes 13 Less: Income tax expense 14 Net Income 15 Cartwright's Balance Sheets December 31, 2017 and 2016 2017 2016 6. Assets Current assets: 8 Cash 9 Short-term Investments 10 Accounts recelvable 11 Inventory 12 Other current assets Total current assets 1,200,000 S 203,200 100,800 4,676,000 508,000 6,688,000 $ 11,437,000 18,125,000 S 2$ 810,000 260,000 378,500 4,190,000 409,500 6,048,000 11,620,000 17,668,000 13 14 Other noncurrent assets 15 Total assets 16 17 18 Current labilitles: 19 Accounts payable 20 Notes payable 21 Accrued llabilitles 22 23 Long-term liabilitles 24 Total llabilitles 25 26 27 Common stock, no par 28 Retalned earnings 29 Total stockholders' equity Llablitles 3,400,000 S 890,000 110,000 4,400,000 $ 4,300,000 8,700,000 S 2,750,000 655,000 195,000 3,600,000 4,216,000 7,816,000 Total current liabilitles Stockholders' equlty 2,502,000 $ 6,923,000 9,425,000 S 2,000,000 7,852,000 9,852,000 30 31 Total llabilitles and equity 32 18,125,000 S 17,668,000
Step by Step Answer:
a Inventory turnover Cost of goods sold 21766030 Average inv...View the full answer
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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