The Robinson Company has the following current assets and current liabilities for these two years: 2010 2011 Cash and marketable securities $ 50,000 $ 50,000 Accounts receivable 300,000 350,000 Inventories 350,000 500,000 Total current assets $700,000 $900,000 Accounts payable $200,000 $250,000 Bank loan 0 150,000 Accruals 150,000 200,000 Total current liabilities $350,000 $600,000 If sales in 2010 were $1.2 million, sales in 2011 were $1.3 million, and cost of goods sold was 70 percent of sales,
Suppose the Robinson Copany had a cost of goods sold of $1000000 in 2010 and 1,200,000 in 2011
a. Calculate the inventory turnover for each year. Comment on your findings.
b. What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintined.