Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following.BEAN SUPERSTOREComparative Balance SheetDecember 31, 2017, 2018, and 2019 201920182017Assets Cash$345,600 $330,460 $300,000 Accounts Receivable65,000 60,000 60,000 Inventory150,830 178,011 155,205 Equipment100,465 101,202 103,085 Total Assets$661,895 $669,673 $618,290 Liabilities Salaries Payable$90,200 $88,563 $84,209 Accounts Payable70,000 71,670 69,331 Notes Payable42,000 50,650 58,250 Equity Common Stock22,695 20,990 19,200 Retained Earnings437,000 437,800 387,300 Total Liabilities and Equity$661,895 $669,673 $618,290 LEGUMES PLUSComparative Balance SheetDecember 31, 2017, 2018, and 2019 201920182017Assets Cash$407,000 $388,450 $356,367 Accounts Receivable85,430 82,670 79,230 Inventory128,080 40,036 52,142 Equipment182,006 23,400 111,701 Total Assets$802,516 $534,556 $599,440 Liabilities Salaries Payable$95,100 $91,455 $89,467 Accounts Payable62,430 86,331 87,197 Notes Payable63,222 67,880 68,312 Equity Common Stock25,464 22,090 22,688 Retained Earnings556,300 266,800 331,776 Total Liabilities and Equity$802,516 $534,556 $599,440 BEAN SUPERSTOREComparative Income StatementYear Ended December 31, 2017, 2018, and 2019 201920182017Net Credit Sales$1,000,000 $984,400 $875,350 COGS450,000 419,600 388,950 Gross Margin$550,000 $564,800 $486,400 Expenses115,000 126,000 100,000 Net Income (Loss) $435,000 $438,800 $386,400 LEGUMES PLUSComparative Income StatementYear Ended December 31, 2017, 2018, and 2019 201920182017Net Credit Sales$1,256,300 $1,020,570 $967,478 COGS500,000 580,320 465,780 Gross Margin$756,300 $440,250 $501,698 Expenses200,000 174,450 169,422 Net Income (Loss) $556,300 $265,800 $332,276 A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. Round your answers to two decimal places. Bean SuperstoreLegume PlusART 2018fill in the blank 1 timesfill in the blank 2 timesART 2019fill in the blank 3 timesfill in the blank 4 timesB. Compute the number of days’ sales in receivables ratios for each company for 2018 and 2019. Assume 365 days a year. Round your answers to two decimal places. Bean SuperstoreLegume PlusDays' Sales 2018fill in the blank 5 daysfill in the blank 6 daysDays' Sales 2019fill in the blank 7 daysfill in the blank 8 daysC. Which company is the better investment and why?a.Legume could be the better investment because the 2019 turnover rate is close to Bean, but the trend is upward, while Bean is downward.b.If one considers other factors such as net income, Legume shows a big jump in 2019 for net income, and greater cash on hand and receivables than Bean.c.Bean could be considered the better investment because its net income, while lower than Legume’s in 2019, is much less volatile and therefore less risky.d.All of the above statements may be correct. ### Accounts Receivable Turnover and Days' Sales in Receivables Analysis#### A. Compute Accounts Receivable Turnover Ratios1. Calculate the accounts receivable turnover ratios for Bean Superstore and Legume Plus for the years 2018 and 2019.2. The results should be rounded to two decimal places.| Company | ART 2018 | ART 2019 ||------------------|-----------|-----------|| Bean Superstore | ____ times | ____ times || Legume Plus | ____ times | ____ times |#### B. Compute Days' Sales in Receivables Ratios1. Calculate the number of days' sales in receivables ratios for both companies for 2018 and 2019.2. Assume a 365-day year and round your results to two decimal places.| Company | Days' Sales 2018 | Days' Sales 2019 ||------------------|------------------|------------------|| Bean Superstore | ____ days | ____ days || Legume Plus | ____ days | ____ days |#### C. Determine the Better InvestmentEvaluate which company is the better investment and justify your choice:a. Legume might be a better investment due to an upward trend in its 2019 turnover rate, which contrasts with Bean’s downward trend.b. Considering other factors such as net income, Legume shows significant improvement in 2019 with higher net income and more cash on hand compared to receivables than Bean.c. Bean could be a safer investment due to its less volatile net income, despite its lower level compared to Legume’s in 2019.d. Consider the validity of all the above statements.Select your conclusion: ___By analyzing the given financial metrics, investors can assess the efficiency and risk profile of these two companies, guiding better investment decisions.

Account Receivable turnover = Net credit salesAverage account receivables Number of days' Sales =…

Answered: Review the select information for Bean…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following.

BEAN SUPERSTORE Comparative Balance Sheet December 31, 2017, 2018, and 2019
	2019	2018	2017
Assets
Cash	$345,600	$330,460	$300,000
Accounts Receivable	65,000	60,000	60,000
Inventory	150,830	178,011	155,205
Equipment	100,465	101,202	103,085
Total Assets	$661,895	$669,673	$618,290
Liabilities
Salaries Payable	$90,200	$88,563	$84,209
Accounts Payable	70,000	71,670	69,331
Notes Payable	42,000	50,650	58,250
Equity
Common Stock	22,695	20,990	19,200
Retained Earnings	437,000	437,800	387,300
Total Liabilities and Equity	$661,895	$669,673	$618,290

LEGUMES PLUS Comparative Balance Sheet December 31, 2017, 2018, and 2019
	2019	2018	2017
Assets
Cash	$407,000	$388,450	$356,367
Accounts Receivable	85,430	82,670	79,230
Inventory	128,080	40,036	52,142
Equipment	182,006	23,400	111,701
Total Assets	$802,516	$534,556	$599,440
Liabilities
Salaries Payable	$95,100	$91,455	$89,467
Accounts Payable	62,430	86,331	87,197
Notes Payable	63,222	67,880	68,312
Equity
Common Stock	25,464	22,090	22,688
Retained Earnings	556,300	266,800	331,776
Total Liabilities and Equity	$802,516	$534,556	$599,440

BEAN SUPERSTORE Comparative Income Statement Year Ended December 31, 2017, 2018, and 2019
	2019	2018	2017
Net Credit Sales	$1,000,000	$984,400	$875,350
COGS	450,000	419,600	388,950
Gross Margin	$550,000	$564,800	$486,400
Expenses	115,000	126,000	100,000
Net Income (Loss)	$435,000	$438,800	$386,400

LEGUMES PLUS Comparative Income Statement Year Ended December 31, 2017, 2018, and 2019
	2019	2018	2017
Net Credit Sales	$1,256,300	$1,020,570	$967,478
COGS	500,000	580,320	465,780
Gross Margin	$756,300	$440,250	$501,698
Expenses	200,000	174,450	169,422
Net Income (Loss)	$556,300	$265,800	$332,276

A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. Round your answers to two decimal places.

	Bean Superstore	Legume Plus
ART 2018	fill in the blank 1 times	fill in the blank 2 times
ART 2019	fill in the blank 3 times	fill in the blank 4 times

B. Compute the number of days’ sales in receivables ratios for each company for 2018 and 2019. Assume 365 days a year. Round your answers to two decimal places.

	Bean Superstore	Legume Plus
Days' Sales 2018	fill in the blank 5 days	fill in the blank 6 days
Days' Sales 2019	fill in the blank 7 days	fill in the blank 8 days

C. Which company is the better investment and why?

a.	Legume could be the better investment because the 2019 turnover rate is close to Bean, but the trend is upward, while Bean is downward.
b.	If one considers other factors such as net income, Legume shows a big jump in 2019 for net income, and greater cash on hand and receivables than Bean.
c.	Bean could be considered the better investment because its net income, while lower than Legume’s in 2019, is much less volatile and therefore less risky.
d.	All of the above statements may be correct.

Transcribed Image Text:### Accounts Receivable Turnover and Days' Sales in Receivables Analysis #### A. Compute Accounts Receivable Turnover Ratios 1. Calculate the accounts receivable turnover ratios for Bean Superstore and Legume Plus for the years 2018 and 2019. 2. The results should be rounded to two decimal places. | Company | ART 2018 | ART 2019 | |------------------|-----------|-----------| | Bean Superstore | ____ times | ____ times | | Legume Plus | ____ times | ____ times | #### B. Compute Days' Sales in Receivables Ratios 1. Calculate the number of days' sales in receivables ratios for both companies for 2018 and 2019. 2. Assume a 365-day year and round your results to two decimal places. | Company | Days' Sales 2018 | Days' Sales 2019 | |------------------|------------------|------------------| | Bean Superstore | ____ days | ____ days | | Legume Plus | ____ days | ____ days | #### C. Determine the Better Investment Evaluate which company is the better investment and justify your choice: a. Legume might be a better investment due to an upward trend in its 2019 turnover rate, which contrasts with Bean’s downward trend. b. Considering other factors such as net income, Legume shows significant improvement in 2019 with higher net income and more cash on hand compared to receivables than Bean. c. Bean could be a safer investment due to its less volatile net income, despite its lower level compared to Legume’s in 2019. d. Consider the validity of all the above statements. Select your conclusion: ___ By analyzing the given financial metrics, investors can assess the efficiency and risk profile of these two companies, guiding better investment decisions.

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