1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) a

Question

1a. For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (including notes) receivable turnover, (d) inventory turnover, (e) days’ sales in inventory, and days’ sales uncollected. (Do no round immediate calculations) https://newconnect.mheducation.com/flow/connect.html ework Required Informatiorn [The following information apples to the questons displayed below] Summary information from the financial statements of two companies competing in the same industry follows Conpany Company Data fros the current year-end balance sheets current year's incone statesent see, eee $933,20 87,3096 3 2e,eee 31,8 Cost of goods sold Accounts receivable, net Current sotes recelvable (trade) Merchandise inventory Prepald expenses Plant assets,net 8, see 14, eee 15, 377 2s]211 9,023 23,489 36,453,400 Interest expense 9,280 7,480 Incone tax expense 84,24033,58 Net income ,soe 7,60 Basic earnings per share 330,60037 400 Cash dividends per share Beginning-of-year balance sheet data ccounts recesvable, eer Liabiiieles and tquity Current sabilities Long-tar" notes pay eLe Common stock, 35 par vale 63,34 53e1,10 Current notes receivable (erade) Required te. For both componies compute the ( curment rato.ics acio-sest rano. io accounts oncuging notes) recesvable turnover, (ict inventory turnover. lel osys soles in inventory and (f days ssies uncollected, (Do not round intermediate celculations.) b. identity tne comoany you consider to be better short-erm creatn 6 8

Explanation / Answer

Current assets barco kyan Cash 20000 31000 Accounts receivable net 36400 53400 Current notes receivable (trade) 9200 7400 Inventory 84240 130500 Prepaid expense 5800 7600 Total current assets 155640 229900 Current liabilities 63340 103300 1 Current ratio = Current assets / current Liabilities Current ratio 2.5 2.2 2 Acid test ratio = (current assets - inventory - prepaid expense )/ current liabilities Acid test 65600 91800 Current liabilities 63340 103300 Acid test ratio 1.0 0.9 3 Receivable turnover = Net sales / Average accounts receivable Net sales   800000 913200 Beginning accounts receivable 29800 54200 Ending accounts receivable 45600 60800 Average accounts receivable 37700 57500 Average accounts receivable = (Beginning + ending )/2 Receivable turnover 21.2 15.9 Times 4 Days sales uncollected = 365 / accounts receivable tunover Days sales uncollected 17 23 Days 5 Inventory turnover = Cost of goods sold / Average inventory Cost of goods sold 587100 640500 Beginning inventory 63600 117400 Ending inventory 84240 130500 Average inventory 73920 123950 Average inventory = (Beginning + Ending )/2 Inventory turnover 7.9 5.2 Times 6 Days sale in inventory = 365 / inventory turnover Days sales in inventory 46 71 Days

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