ratio analysis\nthe following information was taken from nash inc.s december 31st trial balances for this…

ratio analysis\nthe following information was taken from nash inc.s december 31st trial balances for this year and the previous year.\nthis year previous year\naccounts receivable $32,000 $39,000\naccounts payable 47,000 36,000\nsales 222,700 128,000\nsales returns 4,000 2,300\nretained earnings 47,000 16,000\ndividends declared and paid 5,000 1,000\nnet income 36,000 9,000\nrequired:\n1. calculate the net profit margin and accounts receivable turnover for this year. assume a 365 - day year. round your answers to two decimal places.\nthis year\nnet profit margin \naccounts receivable turnover \n2. how much profit does nash make on each sales dollar? round your answer to two decimal places.\n cents\n3. how many days does the average receivable take, in a 365 year, to be paid (assuming all sales are on account)? round your answer to nearest whole day.\n days

ratio analysis\nthe following information was taken from nash inc.s december 31st trial balances for this year and the previous year.\nthis year previous year\naccounts receivable $32,000 $39,000\naccounts payable 47,000 36,000\nsales 222,700 128,000\nsales returns 4,000 2,300\nretained earnings 47,000 16,000\ndividends declared and paid 5,000 1,000\nnet income 36,000 9,000\nrequired:\n1. calculate the net profit margin and accounts receivable turnover for this year. assume a 365 - day year. round your answers to two decimal places.\nthis year\nnet profit margin \naccounts receivable turnover \n2. how much profit does nash make on each sales dollar? round your answer to two decimal places.\n cents\n3. how many days does the average receivable take, in a 365 year, to be paid (assuming all sales are on account)? round your answer to nearest whole day.\n days

Answer

Explanation:

Step1: Calculate net profit margin

Net profit margin = $\frac{\text{Net income}}{\text{Net sales}}\times100%$. Net sales = Sales - Sales returns. Net sales this year = $222700 - 4000=218700$. Net income this year = $36000$. Net profit margin = $\frac{36000}{218700}\times100%\approx16.46%$.

Step2: Calculate accounts - receivable turnover

Accounts - receivable turnover = $\frac{\text{Net sales}}{\text{Average accounts receivable}}$. Average accounts receivable = $\frac{\text{Beginning accounts receivable}+\text{Ending accounts receivable}}{2}$. Here, beginning accounts receivable (previous year) = $39000$, ending accounts receivable (this year) = $32000$. Average accounts receivable = $\frac{39000 + 32000}{2}=35500$. Net sales = $218700$. Accounts - receivable turnover = $\frac{218700}{35500}\approx6.16$.

Step3: Calculate profit per sales dollar

Net profit margin is the profit per sales dollar in percentage terms. To get it in cents, we convert the percentage to a decimal and multiply by 100. Net profit margin = $0.1646$, so profit per sales dollar = $0.1646\times100 = 16.46$ cents.

Step4: Calculate average collection period

Average collection period = $\frac{365}{\text{Accounts - receivable turnover}}$. Accounts - receivable turnover = $6.16$. Average collection period = $\frac{365}{6.16}\approx59$ days.

Answer:

  1. Net profit margin: $16.46%$ Accounts receivable turnover: $6.16$
  2. $16.46$ cents
  3. $59$ days