Chapter 12, Problem 12.32BE

LO 4

(Learning Objective 4: Calculate ratios; evaluate turnover, liquidity, and current debt-paying ability) The financial statements of Big City News, Inc., include the following items:

Requirements

1. Calculate the following ratios for 2018 and 2017. When calculating days, round your answer to the nearest whole number.

1. a. Current ratio
2. b. Quick (acid-test) ratio
3. c. Inventory turnover and days’ inventory outstanding (DIO)
4. d. Accounts receivable turnover
5. e. Days' sales in average receivables or days' sales outstanding (DSO)
6. f. Accounts payable turnover and days’ payable outstanding (DPO). Use cost of goods sold in the formula for accounts payable turnover.
7. g. g Cash conversion cycle (in days)

2. Evaluate the company’s liquidity and current debt-paying ability for 2018. Has it improved or deteriorated from 2017?

3. As a manager of this company, what would you try to improve next year?