Activity Ratios

CFAI end of chapter questions uses the most recent year ending inventory, recievables, trade purchases ect when calculating turnover ratios. Yet the formula states it should be an average of the 2 years on the BS. Dont want to make this simple mistake on the exam… most recent year or avg on BS? thx

I noticed the same thing. I think they messed up on the solutions to the EOC questions…has anyone checked the errata for this? The formula in the CFAI text says to use the average inventory/receivables/trade payables etc. in the denominator, so I think it’s safe to use that.

I think in the corp finance part they did it one was and in FSA it was done another way if I remember correctly? I think if its given, its best to use the average.

i hope we are right… thanks for the look.

ok so whats the verdict?? use average???

if we are given prior year’s B/S items we should use the average. I’m not 100% sure but that’s what I have figured out so far in the official mock exams.

average the B/S kiddos