Balance Sheet and Inventory Turnover

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Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 2010 and $1,200,000 in 2011. a. Calculate the inventory turnover for each year. Comment on your findings b. What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained?

a. inventory turnover for 2010 =COGS/Inventory = $1,000,000/350,000=2.857 inventory turnover for 2011 =COGS/Inventory = $1,200,000/500,000=2.4
b. $1,200,000 /inventory =2.857
Inventory in 2011 to maintain 2010 turnover ratio = $420,021.00

2. The Robinson Company has the following current assets and current liabilities for these two years:
2010 2011
Cash and marketable securities $50,000 $50,000
Accounts receivable $300,000 $350,000
Inventories $350,000 $500,000
Total current assets $700,000 $900,000

Accounts payable $200,000 $250,000
Bank loan 0 150,000
Accruals 150,000 200,000
Total current liabilities $350,000 $600,000
If sales in 2010 were $1.2 million, sales in 2011 were $1.3 million, and cost of goods sold was 70 percent of sales, how long were Robinson's operating cycles and cash conversion cycles in each of these years? What caused them to change during this time?

OC=(Accounts Receivable)/(Sales/365)+Inventory/(COGS/365)

OC_2010=300,000/(1,200,000/365)+350,000/(840,000/365)=243 days

OC_2011=350,000/(1,300,000/365)+500,000/(910,000/365)=299 days

CCC_2010=300,000/(1,200,000/365)+350,000/(840,000/365)-200,000/(840,000/365)=156 days

CCC_2011=350,000/(1,300,000/365)+500,000/(910,000/365)-250,000/(910,000/365)=199 days

3. The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,300,000 in 2011. a. Determine the receivables turnover in each year.
b. Calculate the average collection period for each year.
c. Based on the receivables turnover for 2010, estimate the investment in receivables if net sales were $1, 300,000 in 2011. d. How much of a change in the...
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