Current ratio The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company. Formula of current ratio: Current ratio = Current assets Current liabilities Accounts receivable turnover: Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period. To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

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Answer 1

Question

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

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Answer 2

Question

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

Expert Solution & Answer

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Answer 3

Question

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

Expert Solution & Answer

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Answer 4

Question

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

Expert Solution & Answer

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Answer 5

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

Answer 6

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

Answer 7

Chapter 8, Problem 8.15E

(a)

To determine

Current ratio

The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year, or within completion of the operating cycle, is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio = Current assetsCurrent liabilities

Accounts receivable turnover:

Accounts receivable turnover is a liquidity measure of accounts receivable in times, which is calculated by dividing the net credit sales by the average amount of net accounts receivables. In other words, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To identify: Whether Incorporation M’s short-term liquidity position improving or deteriorating in 2017.

Answer 8

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

Answer 9

(b)

To determine

To identify: Whether changes in turnover ratios affect profitability.

Answer 10

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

Answer 11

(c)

To determine

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

Answer 12

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Answer 13

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Answer 14

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Answer 15

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Solution Summary: The author explains the current ratio of Incorporation M, which assesses the liquidity of a company.

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To identify: Whether changes in turnover ratios affect profitability.

To describe: The ways to improve Incorporation M’s receivables and inventory turnover ratio.

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Chapter 8 Solutions