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Q5. Shown below are selected financial data for Planet X, Inc. and Planet Y, Inc., at the end of the current year: Planet X, Planet Y, Inc. Inc. Net credit sales $ 800,000 S 700,000 Cost of goods sold 600,000 550,000 Cash 80,000 30,000 Accounts receivable 85,000 80,000 (net) Inventory 60,000 150,000 Current liabilities 110,000 100,000 Instructions a. For each of the two companies, compute the following: 1. Current ratio 2. Quick ratio 3. Number of times inventory turned over during the year and the average number of days required to turn over inventory (round computation to the nearest day). 4. Number of times accounts receivable turned over during the year and the average number of days required to collect accounts receivable (round computation to the nearest day). b. From the viewpoint of a short-term creditor, comment on the quality of each company's operations. To which company would you prefer to sell $40,000 in merchandise on a 30-day open account?

Q5. Shown below are selected financial data for Planet X, Inc. and Planet Y, Inc., at the end of the current year: Planet X, Planet Y, Inc. Inc. Net credit sales $ 800,000 S 700,000 Cost of goods sold 600,000 550,000 Cash 80,000 30,000 Accounts receivable 85,000 80,000 (net) Inventory 60,000 150,000 Current liabilities 110,000 100,000 Instructions a. For each of the two companies, compute the following: 1. Current ratio 2. Quick ratio 3. Number of times inventory turned over during the year and the average number of days required to turn over inventory (round computation to the nearest day). 4. Number of times accounts receivable turned over during the year and the average number of days required to collect accounts receivable (round computation to the nearest day). b. From the viewpoint of a short-term creditor, comment on the quality of each company's operations. To which company would you prefer to sell $40,000 in merchandise on a 30-day open account?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Q5. Shown below are selected financial data for Planet X, Inc. and Planet Y, Inc., at the end of the current year: Planet X, Planet Y, Inc. Inc. Net credit sales $ 800,000 $ 700,000 Cost of goods sold 600,000 550,000 Cash 80,000 30,000 Accounts receivable 85,000 80,000 (net) Inventory 60,000 150,000 Current liabilities 110,000 100,000 Instructions a. For each of the two companies, compute the following: 1. Current ratio 2. Quick ratio 3. Number of times inventory turned over during the year and the average number of days required to turn over inventory (round computation to the nearest day). 4. Number of times accounts receivable turned over during the year and the average number of days required to collect accounts receivable (round computation to the nearest day). b. From the viewpoint of a short-term creditor, comment on the quality of each company's operations. To which company would you prefer to sell $40,000 in merchandise on a 30-day open account?
Transcribed Image Text:Q5. Shown below are selected financial data for Planet X, Inc. and Planet Y, Inc., at the end of the current year: Planet X, Planet Y, Inc. Inc. Net credit sales $ 800,000 $ 700,000 Cost of goods sold 600,000 550,000 Cash 80,000 30,000 Accounts receivable 85,000 80,000 (net) Inventory 60,000 150,000 Current liabilities 110,000 100,000 Instructions a. For each of the two companies, compute the following: 1. Current ratio 2. Quick ratio 3. Number of times inventory turned over during the year and the average number of days required to turn over inventory (round computation to the nearest day). 4. Number of times accounts receivable turned over during the year and the average number of days required to collect accounts receivable (round computation to the nearest day). b. From the viewpoint of a short-term creditor, comment on the quality of each company's operations. To which company would you prefer to sell $40,000 in merchandise on a 30-day open account?
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