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The following financial information is for Alpha Corporation are for the fiscal years ending 2017 & 2016 (all balances are normal): Item/Account 2017 2016 Accounts Receivable $9,800 $9,400 Inventory 25,000 16,000 Net Sales (all credit) 80,000 71,000 Cost of Goods Sold 49,000 52,000 Net Income 7,200 6,900 Use this information to determine for FY 2017: (Round & enter your answers to one decimal place and enter the value.)
1. the accounts receivable turnover ratio
2. average collection period accounts receivable
3. Gross Profit Margin
4. Profit Margin
Expert Answer
1.
accounts receivable turnover ratio = (Net receivable sales / Average receivable sales ) = ($80,000) /( ( $9800 + $9400)/2) = $80,000 / $9,600 = 8.33 times
2. average collection period accounts receivable = 365 / average receivable turnover ratio = 365/ 8.33 = 43.817~ 43.82 days
3. Gross Profit Margin = (Total sales – Cost of goods sold ) / Total sales
= ($80,000 – $49,000) / $80,000 = 38.75%
4. Profit Margin =Net profit / Sales = $7,200 / $80,000= 9%
