Chapter 9, Problem E9.26E

Evaluating ratio data

Learning Objective 5

Abanaki Carpets reported the following amounts in its 2018 financial statements. The 2011 figures are given for comparison.

	2018 2017
Balance sheet partial Current Assets: Cash Short-term Investments Accounts Receivable Less: Allowance far Bad Debts Merchandise Inventory Prepaid Insurance Total Current Assets Total Current Liabilities Income statement partial Net Sales (all on account)	$ 5,000 $ 11.000 25,000 14,000 $ 64000 $ 77.000 (7.000) 57,000 (6,000) 71000 194.000 190.000 2,000 2.000 283,000 288,000 105,000 107,000 742,400 730,000

Requirements
1. Calculate Abanaki’s acid-test ratio for 2018. (Round to two decimals.) Determine whether Abanaki’s acid-test ratio improved or deteriorated from 2017 to 2018. How does Abanaki’s acid-test ratio compare with the industry average of 0.80?
2. Calculate Abanaki’s accounts receivable turnover ratio. (Round to two decimals.) How does Abanaki’s ratio compare to the industry average accounts receivable turnover of 10?
3. Calculate the days’ sales in receivables for 2018. (Round to the nearest day.) How do the results compare with Abanaki’s credit terms of net 30?