5) Consider the following financial statement information for the ABC Corporation: Account 2018 2019 Cash Inventory Accounts Receivable Accounts Payable Notes Payable Net Revenue Net Income Cost of Goods Sold $7,516 26,547 10,808 12,416 1,000 $133,844 $16,195 $85,733 $6,424 $10,697 36,986 13,110 13,555 1,200 $151,611 $16,177 $100,063 $6,520 Depreciation Expense a) Calculate the cash conversion efficiency for 2018 and 2019. b) Calculate the net liquid balance for 2018 and 2019. c) Based on each of these measures, is the company more or less liquid in 2019 that it was in 2018? Explain.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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5) Consider the following financial statement information for the ABC Corporation:
Account
2018
2019
Cash
$7,516
26,547
10,808
12,416
1,000
$133,844
$16,195
$85,733
$6,424
$10,697
36,986
13,110
13,555
1,200
$151,611
S16,177
$100,063
$6,520
Inventory
Accounts Receivable
Accounts Payable
Notes Payable
Net Revenue
Net Income
Cost of Goods Sold
Depreciation Expense
a) Calculate the cash conversion efficiency for 2018 and 2019.
b) Calculate the net liquid balance for 2018 and 2019.
c) Based on each of these measures, is the company more or less liquid in 2019 that it
was in 2018? Explain.
d) Determine the cash conversion period and the operating cycle for both years.
e) Do the cash conversion cycle and operating cycle values suggest that there is a
problem management needs to address? If so, explain what it is and what you can to do
about it.
Transcribed Image Text:5) Consider the following financial statement information for the ABC Corporation: Account 2018 2019 Cash $7,516 26,547 10,808 12,416 1,000 $133,844 $16,195 $85,733 $6,424 $10,697 36,986 13,110 13,555 1,200 $151,611 S16,177 $100,063 $6,520 Inventory Accounts Receivable Accounts Payable Notes Payable Net Revenue Net Income Cost of Goods Sold Depreciation Expense a) Calculate the cash conversion efficiency for 2018 and 2019. b) Calculate the net liquid balance for 2018 and 2019. c) Based on each of these measures, is the company more or less liquid in 2019 that it was in 2018? Explain. d) Determine the cash conversion period and the operating cycle for both years. e) Do the cash conversion cycle and operating cycle values suggest that there is a problem management needs to address? If so, explain what it is and what you can to do about it.
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