Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Chapter 5, Problem 5.69BP
(Learning Objectives 1, 7: Show how to speed up cash flow from receivables; evaluate
Requirements
- 1. Compute the following ratios for 2020 and 2019:
- a.
Current ratio - b. Quick (acid-test) ratio
- c. Days’ sales outstanding
- 2. Which ratios improved from 2019 to 2020 and which ratios deteriorated? Are each of the trends favorable or unfavorable?
- 3. Recommend two ways for Sunset Pools to improve cash flows from receivables.
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(Learning Objectives 1, 7: Show how to speed up cash flow from receivables;evaluate liquidity using ratios) The comparative financial statements of Diamond Pools, Inc.,for 2020, 2019, and 2018 included the following select data:Balance sheetCurrent assets:Cash...............................................Investment in trading securities......Receivables, net of allowancefor uncollectible accounts of $7,$6, and $4, respectivelyInventories .....................................Prepaid expenses............................Total current assets........................Total current liabilities.......................Income statementNet sales (all on account)...................(In millions)2020$ 9015027034050$ 900$ 550$7,7002019$ 9518028035540$ 950$ 640$5,3552018$ 6011523032535$ 765$ 650$4,745Requirements1. Compute the following ratios for 2020 and 2019:a. Current ratiob. Quick (acid-test) ratioc. Days’ sales outstanding2. Which ratios improved from 2019 to 2020 and which ratios deteriorated?…
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Chapter 5 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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