Question

Condensed statement of financial position and income statement data for Sipacore Ltd. are shown below: SIPACORE LTD. Statement of Financial Position December 31 (in thousands) 2018 2017 2016 Assets Current assets    Cash $29 $79 $199    Accounts receivable 898 706 502    Inventory 1,198 798 498 Total current assets 2,125 1,583 1,199 Property, plant, and equipment (net) 4,124 3,777 3,168 Total assets $6,249 $5,360 $4,367 Liabilities and Shareholders’ Equity Liabilities    Current liabilities $600 $547 $502    Non-current liabilities 3,044 2,307 1,505       Total liabilities 3,644 2,854 2,007 Shareholders’ equity    Common shares 995 995 995    Retained earnings 1,610 1,511 1,365       Total shareholders’ equity 2,605 2,506 2,360 Total liabilities and shareholders’ equity $6,249 $5,360 $4,367 SIPACORE LTD. Income Statement Year Ended December 31 (in thousands) 2018 2017 2016 Sales (all on credit) $4,473 $4,009 $3,602 Cost of goods sold 2,503 2,113 1,812 Gross profit 1,970 1,896 1,790 Operating expenses 1,436 1,475 1,498 Income from operations 534 421 292 Interest expense 191 129 70 Income before income tax 343 292 222 Income tax expense 86 73 56 Net income $257 $219 $166

(a1) Calculate the receivables turnover ratio, inventory turnover ratio, and current ratio for all three years. Assume that the accounts receivable and inventory balances at the end of 2015 were equal to the balances at the end of 2016. The company does not have an allowance for doubtful accounts and all sales are on credit. (Round answers to 1 decimal place, e.g. 5.2%.) 2016 2017 2018 Receivables turnover times times times Inventory turnover times times times Current ratio : 1 : 1 : 1

Answer 1

Answer

For 2016:

Receivables Turnover = Sales / Accounts Receivable

Receivables Turnover = $3,602 / $502

Receivables Turnover = 7.18 times

For 2017:

Receivables Turnover = Sales / Accounts Receivable

Receivables Turnover = $4,009 / $706

Receivables Turnover = 5.68 times

For 2018:

Receivables Turnover = Sales / Accounts Receivable

Receivables Turnover = $4473 / $898

Receivables Turnover = 4.98 times

Answer of Part b:

For 2016:

Inventory turnover = COGS / Inventory

Inventory Turnover = $1812 /$498

Inventory turnover = 3.64 times

For 2017:

Inventory turnover = COGS / Inventory

Inventory Turnover = $2,113 /$798

Inventory turnover = 2.65 times

For 2018:

Inventory turnover = COGS / Inventory

Inventory Turnover = $2503 /$1198

Inventory turnover = 2.09 times

Answer of Part c:

For 2016:

Current Ratio = Current Assets / Current Liabilities

Current Ratio = $1,199 / $502

Current Ratio = 2.39:1

For 2017:

Current Ratio = Current Assets / Current Liabilities

Current Ratio = $1583 / $547

Current Ratio = 2.89:1

For 2018:

Current Ratio = Current Assets / Current Liabilities

Current Ratio = $2125/ $600

Current Ratio = 3.54:1