Response to the following problem:
J.A. Appliance Company has supplied you with the following data regarding working capital and sales for the years 2011, 2010, and 2009.
|
|
2011
|
2010
|
2009
|
|
Working capital
|
$270,000
|
$260,000
|
$240,000
|
|
Sales
|
$650,000
|
$600,000
|
$500,000
|
|
Industry average for the ratio sales to working capital
|
4.10 times
|
4.05 times
|
4.00 times
|
Required:
a. Compute the sales to working capital ratio for each year.
b. Comment on the sales to working capital ratio for J.A. Appliance in relation to the industry average and what this may indicate.