(a)
Acid-Test Ratio: It is a ratio used to determine a company’s ability to pay back its current liabilities using only liquid assets that are current assets except the inventory and prepaid expenses.
Inventory Turnover: It is a part of liquidity ratios used during the process of ratio analysis. It reflects the number of times a company’s inventory is converted into sale during a particular period.
To compute: Four liquidity ratios that are current ratio, acid-test ratio, accounts receivable turnover and inventory turnover at the end of the year for Company N.
(b)
To analyze: The liquidity ratios of N Company with M Company and industry average.
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Chapter 18 Solutions
ACCOUNTING PRINCIPLES
- General Accounting problemarrow_forwardCorrect answerarrow_forwardTata Company uses a predetermined overhead rate of $45 per machine hour. Estimated machine hours at the beginning of the year were 18,000 and actual machine hours at the end of the year were 18,500. Estimated total manufacturing overhead costs at the beginning of the year are $810,000 and actual total manufacturing overhead costs at the end of the year are $825,000. What is the amount of manufacturing overhead that would have been applied to all jobs during the year? answerarrow_forward
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