Acid-test ratio: The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio . To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

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Answer 1

Question

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

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10. Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B. Compute the number of days' sales in receivables ratios for each company for 2018 and 2019. C. Determine which company is the better investment and why. Round answers to two decimal places. BEAN SUPERSTORE LEGUMES PLUS Comparative Balance Sheet December 31, 2017, 2018, and 2019 Comparative Balance Sheet December 31, 2017, 2018, and 2019 2019 2018 2017 2019 2018 2017 Assets Cash $345,600 67,000 145,830 100,465 $330,460 62,000 178,011 101,202 $300,000 59,000 155,205 103,085 $407,000 85,430 128,080 182,006 $386,450 82,670 40,036 23,400 $356,367 79,230 52,142 111,701 Accounts Receivable Inventory Equipment Total Assets $658,895 $671,673 $617,290 $802,516 $532,556 $599,440 Liabilities Salaries Payable Accounts Payable Notes Payable $ 91,455 $ 90,200 70,000 41,000 $ 88,563…

Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. Compute the number of days’ sales in receivables ratios for each company for 2018 and 2019. Determine which company is the better investment and why. Round answers to two decimal places.

- Please refer to the following Income Statement and Balance Sheet (see attached picture): Prepare a vertical analysis for both the income statement and balance sheet. Write a paragraph comparing the company’s performance with the industry average. Compute the following ratios and comment on what the results mean when evaluating the company: Current ratio Gross profit percentage ratio Debt ratio Profit margin ratio

Answer 2

Question

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Answer 6

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Answer 7

Chapter 8, Problem 8.40BP

(1)(a)

To determine

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Answer 8

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

Answer 9

(1)(b)

To determine

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 simple, it indicates the number of times the average amount of net accounts receivables collected during a particular period.

To calculate: B Cosmetic Supply’s accounts receivable turnover ratio for 2016 and 2015.

Answer 10

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

Answer 11

(1)(c)

To determine

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

Answer 12

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Answer 13

(2)

To determine

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

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Acid-test ratio: The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio . To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Solution Summary: The author calculates B Cosmetic Supply's acid-test ratio for 2016 and 2015 by dividing the net credit sales by the average amount of net accounts receivables.

Videos

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Want to see the full answer?

Chapter 8 Solutions

Acid-test ratio: The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio . To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Solution Summary: The author calculates B Cosmetic Supply's acid-test ratio for 2016 and 2015 by dividing the net credit sales by the average amount of net accounts receivables.

Videos

Acid-test ratio: The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio. To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Average collection period: Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average. To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.

To identify: Whether each ratio has been improved or deteriorated, and identify whether each ratio’s trend is favorable or unfavorable.

Want to see the full answer?

Chapter 8 Solutions

Acid-test ratio:

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To compute: B Cosmetic Supply’s acid-test ratio for 2016 and 2015.

Average collection period:

Average collection period indicates the number of days taken by a business, to collect its outstanding amount of accounts receivable on an average.

To calculate: B Cosmetic Supply’s days’ sales in receivables for 2016 and 2015.