A. A firm has $12,900 in receivables and $411,800 in total assets. The total asset turnover rate is 1.95 and the profit margin is 14.2 percent. How long on average does it take the firm to collect its receivables?
Group of answer choices
11.43 days
5.86 days
31.92 days
80.52 days
62.25 days
B. Cross Hairs Gun Shop has sales of $12,189,000, a profit margin of 2.8 percent, and a capital intensity ratio of 0.49. What is the return on assets?
Group of answer choices
2.21 percent
3.89 percent
5.71 percent
3.37 percent
4.32 percent
a). Total Asset Turnover Ratio = Net Sales/Total Assets
1.95 = Net Sales/$411,800
Net Sales = $803,010
Receivables collection Period = (Accounts Receivables/Net sales)*365 days
= ($12,900/$803,010)*365
= 5.86 days
b). Capital Intensity ratio = Total Assets/Total Sales
0.49 = Total Assets/$12,189,000
Total Assets = $5,972,610
Return on Assets = Net Profit/Total Assets
where, Net Profit = Sales*Profit Margin
= $12,189,000*2.8%
= $341,292
- Return on Assets = $341,292/$5972,610
= 5.71%
Option 3
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