Chik’s Chickens has accounts receivable of $7,083. Sales for the year were $10,600. What is its average collection period?

Chik’s Chickens has accounts receivable of $7,083. Sales for the year were $10,600. What is its average collection period?
 

Explanation
Average collection period equals average receivables divided by average daily sales:

Average collection period =	$7,083	= 243.90 days
	$10,600 / 365

Salad Daze maintains an inventory of produce worth $560. Its total bill for produce over the course of the year was $80,000. How old on average is the lettuce it serves its customers?


Explanation

Days sales in inventories =	$560	= 2.56 days
	$80,000 / 365

In the past year, TVG had revenues of $3.09 million, cost of goods sold of $2.59 million, and depreciation expense of $133,760. The firm has a single issue of debt outstanding with book value of $1.09 million on which it pays an interest rate of 8%. What is the firm’s times interest earned ratio?

 
Explanation

EBIT	= Revenues − COGS − Depreciation
	= $3,090,000 − 2,590,000 − 133,760
	= $366,240

Interest	= .08 × $1.09 million
	= $87,200

Times interest earned = $366,240 / $87,200 = 4.20