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Question
The financial statements of Flathead Lake Manufacturing Company are shown below.
| Income Statement 2017 | ||||
| Sales | $ | 9,300,000 | ||
| Cost of Goods Sold | 5,750,000 | |||
| Depreciation Expense | 550,000 | |||
| Gross Profit | $ | 3,000,000 | ||
| Selling and Administrative Expenses | 2,200,000 | |||
| EBIT | $ | 800,000 | ||
| Interest Expense | 200,000 | |||
| Income before Tax | $ | 600,000 | ||
| Taxes | 375,000 | |||
| Net Income | $ | 225,000 | ||
| Flathead Lake Manufacturing Comparative Balance Sheets | ||||||||
| 2017 | 2016 | |||||||
| Cash | $ | 50,000 | $ | 40,000 | ||||
| Accounts Receivable | 570,000 | 600,000 | ||||||
| Inventory | 530,000 | 460,000 | ||||||
| Total Current Assets | $ | 1,150,000 | $ | 1,100,000 | ||||
| Fixed Assets | 2,050,000 | 1,400,000 | ||||||
| Total Assets | $ | 3,200,000 | $ | 2,500,000 | ||||
| Accounts Payable | $ | 320,000 | $ | 300,000 | ||||
| Bank Loans | 480,000 | 400,000 | ||||||
| Total Current Liabilities | $ | 800,000 | $ | 700,000 | ||||
| Long-term Bonds | 1,500,000 | 1,000,000 | ||||||
| Total Liabilities | $ | 2,300,000 | $ | 1,700,000 | ||||
| Common Stock (200,000 shares) | 200,000 | 200,000 | ||||||
| Retainded Earnings | 700,000 | 600,000 | ||||||
| Total Equity | $ | 900,000 | $ | 800,000 | ||||
| Total Liabilities and Equity | $ | 3,200,000 | $ | 2,500,000 | ||||
Note: The common shares are trading in the stock market for $15 per share.
Refer to the financial statements of Flathead Lake Manufacturing Company. The firm's inventory turnover ratio is ________. (Please keep in mind that when a ratio involves both income statement and balance sheet numbers, the balance sheet numbers for the beginning and end of the year must be averaged.)
A) 11.6
B) 10.2
C) 9.5
D) 7.7
Answer
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