Chapter 4, Problem 4.15BE

To determine

Ratio Analysis:

Ratio analysis is a tool to analyze the financial statements of a company which helps to express a mathematical relationship among the items of financial statements.

Receivables turnover ratio:

Receivables turnover ratio is an activity ratio, which measures the ability of the company to collect cash from its customers. This ratio also indicates the manner in which the company extends its credit policy and efficient collection of debts. It can be calculated by using the following formula:

$\text{Receivable turnover ratio}=\frac{\text{Net credit sales}}{\text{Average net accounts receivables}}$

The receivables turnover ratio of Company UC.

To determine

Inventory turnover ratio:

Inventory turnover ratio is used to determine the number of times inventory used or sold during the particular accounting period. It helps to measure the efficiency of inventory management. It can be calculated by using the following formula:

$\begin{array}{c}\text{Receivable turnover ratio}=\frac{\text{Net credit sales}}{\text{Average net accounts receivables}}\\ \text{= }\frac{\$600,000}{\$110,000}\\ =5.45\text{ times}\end{array}$

The inventory turnover ratio.