0.37 0.42 0.65 3.34 7. Rawe Corporation\'s accounts receivable at the end of Yea
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Question
0.37
0.42
0.65
3.34
7.
Rawe Corporation's accounts receivable at the end of Year 2 was $356,000 and its accounts receivable at the end of Year 1 was $309,000. Sales, all on account, amounted to $1,440,000 in Year 2. The company's average collection period (age of receivables) for Year 2 is closest to: (Assume 365 days a year. Round intermediate calculations to 2 decimal places.)
4.3 days
90.2 days
84.3 days
78.3 days
8.
3.75
0.66
1.75
2.75
Nickolls Corporation has provided the following financial data:Explanation / Answer
6. The current ratio is computed by dividing current assets with the current liabilities, hence the formula of computing current ratio is:
Current Assets/ Current Liabilities:
799,000 / 239,000 =
3.34
Hence option D 3.34 is correct option.
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7. The average collection period is computed by using following formula:
Number of working days/ Debtor Turnover ratio.
The debtor turnover ratio can be computed by using following formula:
Net Credit Sales/ Average Debtor
1440000 / 332500
= 4.33
So collection period shall be:
365/ 4,33
= 84.3 days so the correct option is C
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8. The company times interest earned ratio can be computed by using following formula:
Earning before interest and taxes / Interest Expense
68,739/ 25,000
=2.75
Hence option D is the correct option.
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