posi all transatuu The comparative financial statements of Norfolk Cosmetic Su 2

Question

posi all transatuu The comparative financial statements of Norfolk Cosmetic Su 2016 include the data shown here: Supply for 2018,2jy P9-34A Learning Objective 5 P9.34A Using ratio data to evaluate a company's fi ancial Learning Objective 5 1. Acid-test ratio (2018) 0.88 2018 2017 2016 Balance sheet-partial Current Assets: Cash Short-term investments Accounts Receivable, Net Merchandise Inventory Prepaid Expenses Total Current Assets 70,000 140,000 280,000 355,000 70,000 915,000 560,000 60,000 170,000 240,000 330,000 35,000 50,000 120,000 260,000 310,000 35,000 835,000 775,000 630,000 640,000 Total Current Liabilities Income statement-partial Net Sales (all on account) 5,890,000 5,130,000 4,210,000

Explanation / Answer

a) Acid test ratio 2018 2017 (current assets-prepaid expenses-inventory)/ current liabilites (915000-355000-70000)/560000 (835000-330000-35000)/630000 0.88 0.75 b) Accounts receivale turnover ( Sales / average Accounts receivable) (5890000/((280000+240000)/2)) (5130000/((240000+260000/2)) 22.65 20.52 c) Days sales in receivables Accouts receivable /annual sales/365 (280000/(5890000/365) (240000/(5130000/365) 17 17 2) 1) Acid test ratio and accounts receivable turnover ratio is increased from 2017 to 2018 and there is no detoriaration and no change accounts receivable days and there is a favorable trend

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