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Worked-example setupScope and assumptions
- The supplied flows and balances use one entity, reporting basis, currency, and annual period.
- No write-offs, returns, discounts, allowances, acquisitions, write-downs, or other omitted rollforward adjustments occur.
- Beginning-ending averages adequately represent the three operating balances for this bounded check.
- Period
- Birchline Year 3, with Year 2 net sales as the horizontal-analysis base
- Units
- Whole USD; turnover in times per year; decimal common-size shares and percentage changes
- Rounding
- Full precision internally; displayed rates to two decimals
Reconcile the three operating balances
Birchline reports $420,000 of net credit sales. Opening receivables of $47,000 plus those sales, less ending receivables of $48,000, imply $419,000 of customer collections. Average receivables are $47,500, so receivables turnover is 8.84 times.
Inventory follows a different rollforward. Opening Inventory of $71,000 plus $304,000 of purchases, less $305,000 of cost of goods sold, equals the $70,000 ending balance. Average Inventory is $70,500, and Inventory turnover is 4.33 times.
Opening payables of $42,000 plus $245,000 of credit purchases, less the $43,000 ending balance, imply $244,000 of supplier payments. The $42,500 average payables balance produces payable turnover of 5.76 times.
Keep the percentage bases visible
Year 3 cost of goods sold is 58.10% of the same year's $525,000 net sales. Year 3 net sales exceed Year 2 net sales by $40,000, or 8.25% of the $485,000 comparison amount. A new $6,000 fee has a $6,000 dollar change, but its zero comparison amount does not support an ordinary percentage change.
Stop at the calculation boundary
These checks establish that the supplied arithmetic reconciles. They do not show whether the average balances represent the year, whether the source labels are comparable, or why any turnover changed. Terms, aging, product movement, supplier records, and interim balances would be needed for those conclusions.
Verified calculation · operating efficiency task
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- common size
- 1 field
Inspect data
{
"year_3_cost_of_goods_sold": {
"amount": 305000,
"base": 525000
}
}- horizontal
- 2 fields
Inspect data
{
"net_sales": {
"comparison_amount": 485000,
"current_amount": 525000
},
"new_fee": {
"comparison_amount": 0,
"current_amount": 6000
}
}- inventory
- 4 fields
Inspect data
{
"cost_of_goods_sold": 305000,
"ending_inventory": 70000,
"merchandise_purchases": 304000,
"opening_inventory": 71000
}- payables
- 3 fields
Inspect data
{
"credit_purchases": 245000,
"ending_payables": 43000,
"opening_payables": 42000
}- receivables
- 3 fields
Inspect data
{
"ending_receivables": 48000,
"net_credit_sales": 420000,
"opening_receivables": 47000
}- zero base percentage policy
- omit
Recomputed result
| Measure | Value |
|---|---|
| average inventory | 70,500 |
| average payables | 42,500 |
| average receivables | 47,500 |
| common size year 3 cost of goods sold | 0.581 |
| customer collections | 419,000 |
| horizontal net sales dollar change | 40,000 |
| horizontal net sales percent change | 0.0825 |
| horizontal new fee dollar change | 6,000 |
| inventory rollforward difference | 0 |
| inventory turnover | 4.3262 |
| payables turnover | 5.7647 |
| receivables turnover | 8.8421 |
| supplier payments | 244,000 |