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Calculate the DIO, DSO and DPO for the company from 2002 to 2006(E).

Question

Calculate the DIO, DSO and DPO for the company from 2002 to 2006(E).

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Solution

To calculate the DIO (Days Inventory Outstanding), DSO (Days Sales Outstanding), and DPO (Days Payable Outstanding) for the company from 2002 to 2006, we need to follow these steps:

  1. Determine the formula for each ratio:

    • DIO = (Average Inventory / Cost of Goods Sold) * 365
    • DSO = (Average Accounts Receivable / Net Sales) * 365
    • DPO = (Average Accounts Payable / Cost of Goods Sold) * 365
  2. Gather the necessary financial data for each year:

    • Average Inventory: The average value of inventory over the year.
    • Cost of Goods Sold: The total cost of goods sold during the year.
    • Average Accounts Receivable: The average value of accounts receivable over the year.
    • Net Sales: The total net sales during the year.
    • Average Accounts Payable: The average value of accounts payable over the year.
  3. Calculate the average values for each year:

    • Average Inventory = (Beginning Inventory + Ending Inventory) / 2
    • Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2
    • Average Accounts Payable = (Beginning Accounts Payable + Ending Accounts Payable) / 2
  4. Plug in the values into the formulas and calculate the ratios for each year.

  5. Repeat steps 3 and 4 for each year from 2002 to 2006.

By following these steps, you will be able to calculate the DIO, DSO, and DPO for the company from 2002 to 2006.

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