ES-35B. (Learning Objectives 6, 7: Show how to speed up cash flow from receivabl
ID: 2509228 • Letter: E
Question
ES-35B. (Learning Objectives 6, 7: Show how to speed up cash flow from receivables; valuate liquidity through ratios) Saybrooke, Inc., reported the following items at December 31, 2016, and 2015: A1 Balance Sheets 1Summarized) 2 Year-end 2016 2015 Year-end 2016 2015 Current liabilities: 5 Current assets 6 Cash S 16,000 $ 12,000 Accounts payable$ 19,000 s 20,500 Marketable securities 23,000 12,000 Other current liabilities 107,000 109,000 | 20,000 21,000 148,000148,500 294,000 S 299,000 ?Accountsreceivable.net-. 58,00?-12,000ILong.term liabilities 9 Inventory 195,000 191,000 10 Other current assets2000 2,000 Stockholders' equity 10000 11 Long-term assets 12 Total assets 13 14 Income statement (partial: 2016 15 Sales Revenue 16 $ 294,000 299,000 Total liabilities and equity $732.000Explanation / Answer
Computation of Quick Ratio Particular Amount Quick Asset Cash 16000 Marketable Securities 23000 Net Account Receivable 58000 Total 97000 Current Liabilities Account Payable 19000 Other Current Liabilities 107000 Total 126000 Quick Ratio (97000/126000 0.77:1 Quick Asset/Current Liabilities Computation of Days Sales in Receivable Particular Amount Amount of One Day Sale Net Sales 732000 No. of Days in Year 365 On Day Sale( 732000/365) 2005.479 Average Net Receivable Oepning Balance 72000 Closing Balance 58000 Average Net Receivable 65000 ( Opening +Closing)/2 Days in Sales Receivable 32.4112 (Average Net Receivable/On Day Sales Hence the Number of Days sales in receivable of incorporation $ for the year is 32 Days . As the credit term $ is 30 Days , the days sales receivable of 32 days Quite good
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