the robinson has the follow current assets and current liabilities for these two
ID: 2677477 • Letter: T
Question
the robinson has the follow current assets and current liabilities for these two years2010 2011
cash and marketable securities $50,000 $50,000
accounts receivable 300,000 350,000
inventories 350,000 500,000
total current assets $ 700,000 $900,000
accounts payable $200,000 $250,000
bank loan 0 150,000
accruals 150,000 200,000
total current liabilities $350,000 $600,000
if sales in 2010 were $1,2million, sales in 2011 were $1.3 million, and cost of goods sold was 70 percent of sales, how long were Robinson's operating cycles and cash conversion cycles in each of these years? what caused them to change during this time?
Explanation / Answer
Current Ratio is calculated as: Current Assets / Current Liabilities Here it is: 2011 $700,000 / $350,000 = 2 2012 $900,000 / $600,000 = 1.5 Higher is better, so a drop from 2.0 to 1.5 indicates a degradation of the company's liquidity Quick Ratio is measured as: (Current Assets - Inventory) / Current Liabilities Here it is: 2011 ($700,000 - $350,000) / $350,000 = 1.0 2012 ($900,000 - $500,000) / $600,000 = 0.667 Again, the ratio has declined in 2012 indicating a worsening of the company's liquidity.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.