CALCULATING AND INTERPRETING ACCOUNTS RECEIVABLE AND INVENTORY TURNOVER RATIOS. Nucor and AK Steel are steel manufacturers. Nucor produces steel in mini-mills. Mini-mills transform scrap ferrous metals into standard sizes of rolled steel, which Nucor then sells to steel service centers and distribu- tors. Its steel falls on the lower end in terms of quality (strength and durability). AK Steel is an integrated steel producer, transforming ferrous metals into rolled steel and then into various steel products for the automobile, appliance, construction, and other industries. Its steel falls on the higher end in terms of quality. Exhibit 4.24 sets forth various data for these two companies for 2007 and 2008.
Required
a. Calculate the accounts receivable turnovers for Nucor and AK Steel for 2007 and 2008.
b. Describe the likely reasons for the differences in the accounts receivable turnovers for these two firms.
c. Describe the likely reasons for the trend in the accounts receivable turnovers of these two firms during the two-year period.
d. Calculate the inventory turnovers for Nucor and AK Steel for 2007 and 2008.
e. Describe the likely reasons for the differences in the inventory turnovers of these two firms.
f. Describe the likely reasons for the trend in the inventory turnovers of these two firms during the two-year period.
Text Book: Financial Reporting, Financial Statement Analysis and Valuation: A Strategic Perspective By James Wahlen, Stephen Baginski, Mark Bradshaw.