Concept Introduction:
The financial ratios are a measure used to know about the performance of the business.
Among all the three financial ratios, following three are discussed here –
1. Acid-test ratio
2.
3. Days’ sales in receivables
The ratios are discussed as –
1. Acid-test ratio – Acid-test ratio is the ratio used to measure the liquidity of the business to pay back it current liabilities obligations. It is calculated as –
2. Accounts receivables turnover ratio – This ratio is an activity ratio. It is used to measure how efficiently a firm is using its assets or how the credit is issued to customers and the cash is collected. This ratio is calculated as under –
3. Days’ sales in receivables – this ratio explains, how many days it takes generally to convert accounts receivables in cash or fast the accounts receivables are converted into cash. This ratio is calculated as under –
Requirement 1
To compute:
Acid-test Ratio for the year 2016 and 2015
Requirement 2
To compute:
Accounts receivables turnover ratio for the year 2016 and 2015
Requirement 3
To compute:
Days’ sales in receivables for 2016 and 2015
Requirement 4
To compare:
Ratios for the year 2015 and 2016
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