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. Accounts receivables turnover 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 – A c i d − t e s t r a t i o = Q u i c k A s s e t s C u r r e n t L i a b i l i t i e s A c i d − t e s t r a t i o = C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s C u r r e n t L i a b i l i t i e s 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 – A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = N e t c r e d i t s a l e s A v e r a g e n e t a c c o u n t s r e c e i v a b l e s 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 – D a y s ’ s a l e s i n r e c e i v a b l e s = 365 D a y s A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o Requirement 1 To compute: Acid-test Ratio for the year 2016 and 2015

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Answer 1

Question

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

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Answer 2

Question

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

Expert Solution & Answer

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See solution

Answer 4

Question

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

Answer 6

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

Answer 7

Chapter 9, Problem P9.33APGA

To determine

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. Accounts receivables turnover

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 –

$\begin{array}{l} A c i d - t e s t r a t i o = \frac{Q u i c k A s s e t s}{C u r r e n t L i a b i l i t i e s} \\ A c i d - t e s t r a t i o = \frac{C a s h + S h o r t t e r m i n v e s t m e n t + N e t a c c o u n t s r e c e i v a b l e s}{C u r r e n t L i a b i l i t i e s} \end{array}$

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 –

$A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o = \frac{N e t c r e d i t s a l e s}{A v e r a g e n e t a c c o u n t s r e c e i v a b l e s}$

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 –

$D a y s ’ s a l e s i n r e c e i v a b l e s = \frac{365 D a y s}{A c c o u n t s r e c e i v a b l e s t u r n o v e r r a t i o}$

Requirement 1

To compute:

Acid-test Ratio for the year 2016 and 2015

Answer 8

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

Answer 9

To determine

Requirement 2

To compute:

Accounts receivables turnover ratio for the year 2016 and 2015

Answer 10

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

Answer 11

To determine

Requirement 3

To compute:

Days’ sales in receivables for 2016 and 2015

Answer 12

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

Answer 13

To determine

Requirement 4

To compare:

Ratios for the year 2015 and 2016

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

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Answer 17

Ch. 9 - 1. With good internal controls, the person who...Ch. 9 - Prob. 2QC Ch. 9 - Which of the following is a limitation of the...Ch. 9 - 3. The entry to record a write-off of an...Ch. 9 - Brickman Company uses the allowance method to...Ch. 9 - Brickman’s ending balance of accounts Receivable...Ch. 9 - At December 31 year-end, Crain Company has an...Ch. 9 - Using the data in the preceding question, what...Ch. 9 - At year-end, Schultz Company has cash of $11,600,...Ch. 9 - Using the data in the preceding question, assume...

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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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Chapter 9 Solutions

Videos

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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Chapter 9 Solutions

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