Summary Business Accounting

Receivables
Inventory turnover
turnover
ratio
ratio = Cost Net
of goods
sales sold

AverageAverage
accountsinventory
receivable (net)



Receivables
Inventory turnover
turnover ratio
ratio = $400,000*
$600,000

[$100,000
[$80,000 + 60,000]
120,000]÷÷22



= 5.45 times
5.71

Question:

Universal Calendar Company began the year with accounts receivable and inventory balances of

$100,000 and$80,000, respectively. Year-end balances for these accounts were $120,000 and $60,000,

respectively. Sales for the year of $600,000 generated a gross profit of $200,000. Calculate the

receivables and inventory turnover ratios for the year.



Answer:




*$600,000 – 200,000