Introduction:
1.
2. Acid-test ratio: The acid test ratio is also known as the quick ratio. It is a
3. Cash ratio: Cash ratio of a company is the ratio of cash and cash equivalents to its current liabilities. As only cash and cash equivalents are compared with the current liabilities, it is an extreme liquidity ratio. It assists in measuring the ability of a business to repay its current liabilities by using only its cash and cash equivalents.
4.
5. Day’s sales in receivables: Day’s sales in receivable refer to the amount of money owed by the customers for sales made to them on credit. By dividing the outstanding receivables by the average daily sales value, an estimate for the number of days’ sales in accounts receivable can be achieved.
6. Asset turnover: Asset turnover ratio estimates the value of the sales or revenues of a company generated relative to the value of its assets. The asset turnover ratio generally indicates the efficiency with which a company is using its assets to generate revenues.
7.
To calculate: The Company’s success for the first year of operations by calculating the given ratios.
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Horngren's Accounting, Student Value Edition (12th Edition)
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