Beardom Gym Center Cash P150,000 Trading Investments 70,000 Receivables: Jan. 1 158,000 Dec. 31 225,000 Merchandise Inventory Jan. 1 250,000 Dec. 31 185,000 Current Liabilities 230,000 Cost of Goods Sold 2,750,000 Credit Sales 4,800,000 Current Assets = cash + Trading investments + Ending receivables + Ending inventory Current Assets = P150,000 + P70,000 + P225,000 + P185,000 Current Assets = P 630,000 Working capital = Current Assets - Current liabilities Working capital = P630,000 – P230,000 Working capital = P 400,000 Current ratio = Current Assets / Current liabilities Current ratio = P630,000 / P230,000 Current ratio = 2.74 Quick ratio = Current Assets - Inventory / Current liabilities Quick ratio = P630,000 – P185,000 / P230,000 Quick ratio = P445,000 / P230,000 Quick ratio = 1.94 Inventory turnover = Cost of goods sold / Average inventory Inventory turnover = P2,750,000 / (P185,000 + P250,000 )/2 Inventory turnover = P2,750,000 / P217,500 Inventory turnover = 12.64 Receivable turnover = Credit sales / Average receivables Receivable turnover = P4,800,000 / (P225,000 +P158,000)/2 Receivable turnover = P4,800,000 / P191,500 Receivable turnover = 25.07 Average age of receivables = 365 days / Receivable turnover ratio Average age of receivables = 365 / 25.07 Average age of receivables = 14.56 Question: If the industry show’s average current ratio is 3.2:1 and quick ratio of 2.5:1, analyze the liquidity performance of Beardom versus the industry.
Beardom Gym Center
Cash P150,000
Trading Investments 70,000
Receivables:
Jan. 1 158,000
Dec. 31 225,000
Merchandise Inventory
Jan. 1 250,000
Dec. 31 185,000
Current Liabilities 230,000
Cost of Goods Sold 2,750,000
Credit Sales 4,800,000
Current Assets = cash + Trading investments + Ending receivables + Ending inventory
Current Assets = P150,000 + P70,000 + P225,000 + P185,000
Current Assets = P 630,000
Working capital = P630,000 – P230,000
Working capital = P 400,000
Current ratio = P630,000 / P230,000
Current ratio = 2.74
Quick ratio = Current Assets - Inventory / Current liabilities
Quick ratio = P630,000 – P185,000 / P230,000
Quick ratio = P445,000 / P230,000
Quick ratio = 1.94
Inventory turnover = Cost of goods sold / Average inventory
Inventory turnover = P2,750,000 / (P185,000 + P250,000 )/2
Inventory turnover = P2,750,000 / P217,500
Inventory turnover = 12.64
Receivable turnover = Credit sales / Average receivables
Receivable turnover = P4,800,000 / (P225,000 +P158,000)/2
Receivable turnover = P4,800,000 / P191,500
Receivable turnover = 25.07
Average age of receivables = 365 days / Receivable turnover ratio
Average age of receivables = 365 / 25.07
Average age of receivables = 14.56
Question:
If the industry show’s average current ratio is 3.2:1 and quick ratio of 2.5:1, analyze the liquidity performance of Beardom versus the industry.
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