Homework Chapter 15 P2, P3 and P4 2. The Robinson Company has the following curr
ID: 2681546 • Letter: H
Question
Homework Chapter 15 P2, P3 and P42. The Robinson Company has the following current assets and current liabilities for these two years:
2010 2011
Cash & 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
Accrual 150,000 200,000
Total Current Liabilities 350,000 600,000
If sales in 2010 $1.2 million, sales in 2011 were $1.3 million, and cost of goods sold was 70 percent of sales, how long were Robinson
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.