Question 2 Vee-Jay Company (Pty) Ltd Extracted the following Ratios from its books for the year 2020 together with the relevant industry averages Ratios 2020 Industry average Current Ratio 1.9 2 Acid test ratio 0.8 1 Inventory Turnover 4 times 6 times Debtors’ collection period (days) 51 days 40 days . Creditors payment period (days) 61 days 50 days Required: 1. For each of the above five ratios , answer the following : a) what does the ratio measure b) state whether there is an improvement or decline in the ratio in comparison with the industry average 2. Comment on the company’s overall liquidity position in comparison with industry.
Question 2 Vee-Jay Company (Pty) Ltd Extracted the following Ratios from its books for the year 2020 together with the relevant industry averages Ratios 2020 Industry average Current Ratio 1.9 2 Acid test ratio 0.8 1 Inventory Turnover 4 times 6 times Debtors’ collection period (days) 51 days 40 days . Creditors payment period (days) 61 days 50 days Required: 1. For each of the above five ratios , answer the following : a) what does the ratio measure b) state whether there is an improvement or decline in the ratio in comparison with the industry average 2. Comment on the company’s overall liquidity position in comparison with industry.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Question 2
Vee-Jay Company (Pty) Ltd Extracted the following Ratios from its books for the year 2020 together with the relevant industry averages
| Ratios | ||
| 2020 | Industry average | |
| 1.9 | 2 | |
| Acid test ratio | 0.8 | 1 |
| Inventory Turnover | 4 times | 6 times |
| Debtors’ collection period (days) | 51 days | 40 days |
| . Creditors payment period (days) | 61 days | 50 days |
Required:
1. For each of the above five ratios , answer the following :
a) what does the ratio measure
b) state whether there is an improvement or decline in the ratio in comparison with the
industry average
2. Comment on the company’s overall liquidity position in comparison with industry.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education