Homework Help is Here – Start Your Trial Now!
Business
Accounting
1. What is the average collection period? 2. What is the average payment period?

1. What is the average collection period? 2. What is the average payment period?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Notes:
a. The firm has an 8-year financial lease requiring annual beginning-of-year payments of $50,000. Five years of the lease have yet to run.
b. Annual credit purchases of $6,200,000 were made during the year.
c. The annual principal payment on the long-term debt is $100,000.
d. On December 31, 2012, the firm’s common stock closed at $39.50 per share.

Question:

1. What is the average collection period?

2. What is the average payment period?

Case 1 Given the following financial statements historical ratios, and industry averages, calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Sterling Company Income Statement for the Year Ended December 31, 2012 $ 10,000,000 7,500,000 Sales revenue Less: Cost of Goods Sold Gross Profits 2,500,000 Less: Operating expenses Selling expense General and administrative expens 300,000 650,000 Lease expense 50,000 Depreciation expense Total operating expense 200,000 1,200,000 Operating profits 1,300,000 200,000 Less: Interest expense Net profit before taxes 1,100,000 Less Taxes (rate - 40%) 440,000 Net profit after taxes Less: Preferred stock dividends 660,000 50,000 Earnings available for common stockholders 24 610,000 Earnings per share Sterling Company Balance Sheet as of December 31, 2012 Assets Liabilities & Stockholders' Equtiy Cash 200,000 Accounts payable Notes payable 900,000 Marketable Securities 50,000 200,000 Accounts receivable 800,000 Accruals 100,000 Inventories 950,000 Total current liabilities 1,200,000 Total current assets 2.000,000 Long-term debt (include financial leases) Total liabilities 3,000,000 Gross fixed assets (at cost) 12,000,000 4,200,000 Less: Accumulated depreciation 3,000,000 Preferred stock (25,000 shares, $2 dividend) 1,000,000 Net fixed assets 9,000,000 Common stiock (200,000 shares at $3 par) Paid-in capital in excess of par value-common 600,000 Other assets 1,000,000 5,200,000 Total assets 12,000,000 Retained earrings Total stockholders' equity Total liabilities & stockholders' equity 1,000,000 7,800,000 12,000,000
Transcribed Image Text:Case 1 Given the following financial statements historical ratios, and industry averages, calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Sterling Company Income Statement for the Year Ended December 31, 2012 $ 10,000,000 7,500,000 Sales revenue Less: Cost of Goods Sold Gross Profits 2,500,000 Less: Operating expenses Selling expense General and administrative expens 300,000 650,000 Lease expense 50,000 Depreciation expense Total operating expense 200,000 1,200,000 Operating profits 1,300,000 200,000 Less: Interest expense Net profit before taxes 1,100,000 Less Taxes (rate - 40%) 440,000 Net profit after taxes Less: Preferred stock dividends 660,000 50,000 Earnings available for common stockholders 24 610,000 Earnings per share Sterling Company Balance Sheet as of December 31, 2012 Assets Liabilities & Stockholders' Equtiy Cash 200,000 Accounts payable Notes payable 900,000 Marketable Securities 50,000 200,000 Accounts receivable 800,000 Accruals 100,000 Inventories 950,000 Total current liabilities 1,200,000 Total current assets 2.000,000 Long-term debt (include financial leases) Total liabilities 3,000,000 Gross fixed assets (at cost) 12,000,000 4,200,000 Less: Accumulated depreciation 3,000,000 Preferred stock (25,000 shares, $2 dividend) 1,000,000 Net fixed assets 9,000,000 Common stiock (200,000 shares at $3 par) Paid-in capital in excess of par value-common 600,000 Other assets 1,000,000 5,200,000 Total assets 12,000,000 Retained earrings Total stockholders' equity Total liabilities & stockholders' equity 1,000,000 7,800,000 12,000,000
Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS