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FNSTMT1 - Class Exercise 2

The document analyzes financial ratios for Merry Mart including inventory turnover ratio, average age of inventory, average collection period, average payment period, total asset turnover, and fixed asset turnover. It finds the inventory turnover is low, average age of inventory is high, and payment period is over 100 days while collection period is under 10 days. It concludes Merry Mart relies heavily on inventory but has large fixed assets and needs to improve supplier relationships and catch up to competitors.

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charleneashleyyy
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24 views2 pages

FNSTMT1 - Class Exercise 2

The document analyzes financial ratios for Merry Mart including inventory turnover ratio, average age of inventory, average collection period, average payment period, total asset turnover, and fixed asset turnover. It finds the inventory turnover is low, average age of inventory is high, and payment period is over 100 days while collection period is under 10 days. It concludes Merry Mart relies heavily on inventory but has large fixed assets and needs to improve supplier relationships and catch up to competitors.

Uploaded by

charleneashleyyy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Charlene Ashley Cu

FNSTMT1 - V24

a. Inventory Turnover Ratio


COGS
Average Inventory

5,292,211,051
(1,372,727,670 + 2,393,629,841) / 2

2.810254223
inventory turnover is relatively low so they may have inventory that is already expired before sold. competition including 7/11 and uncle johns may play a role in this.

b. Average Age of Inventory


365 Days
Inventory Turnover

365 Days
2.810254223

129.8814879

c. Average Collection Period


AR
Ave. sales per day

Annual Sales * Assumption: use sale of goods


Ave. sales per day =
365

6,328,567,786
Ave. sales per day =
365

Ave. sales per day = 17,338,541.88

146646050
17,338,541.88

8.457807526
with short average collection period, merry mart is open to short term investments.

d. Average Payment Period, assuming that purchases are equal to 70% COGS
AP
Average Credit Purchases per day

Annual Credit Purchases


Average Credit Purchases per day =
365 Days

Average Credit Purchases per day = (5292211051 * 0.7) / 365

Average Credit Purchases per day = 10149445.85

1,262,654,570
10149445.85

124.4062571

e. Total Asset Turnover


Sales
Average Total Assets

6,328,567,786
(8,434,608,454 + 6,492,458,225)/2

0.8479318706
f. Fixed Asset Turnover
Sales
Average Total Fixed Assets * Assumption: use PPE account only for fixed asset

6,328,567,786
(2624001013+1718685658) / 2

2.914586414
fixed assets are high so it can be said that its effectively being used to generate sales.
merry mart heavily relies in inventory to generate sales.
also, merry mart is still able to generate sales despite having large amounts of fixed assets (as seen in FS).
overall, the company has to look more into its relationship with suppliers and also ensure that they catch up with the competition.

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