Acid-Test Ratio: The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business. Accounts Receivable Turnover Ratio: The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company. Days’ Sales in Receivable: It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio. To determine : 1. Compute these ratios for 2016 and 2015: a. Acid-Test Ratio b. Accounts Receivable Turnover Ratio c. Days’ sales in receivables 2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

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Question

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

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Question

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

Expert Solution & Answer

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Answer 3

Question

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

Expert Solution & Answer

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Answer 4

Question

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

Expert Solution & Answer

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Answer 5

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

Answer 6

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

Answer 7

Chapter 9, Problem P9.40BPGB

To determine

Acid-Test Ratio:

The liquidity ratio which measures a company ability to clear or pay-off its current liabilities by using its cash and cash equivalent and other quick assets is called acid –test ratio. It is computed by dividing the quick assets by the current liabilities of the business.

Accounts Receivable Turnover Ratio:

The rate of turnover of average accounts receivable during an accounting period compare to its credit sales is called accounts receivable turnover ratio. Accounts receivable turnover ratio is computed by dividing the credit sales by the average accounts receivable of a company.

Days’ Sales in Receivable:

It is an estimation of average collection period. Days’ Sales in Receivable indicates the efficiency of a company in collecting its accounts receivables. It is computed by dividing the number of days in a year by accounts receivable turnover ratio.

To determine:

1. Compute these ratios for 2016 and 2015:

a. Acid-Test Ratio

b. Accounts Receivable Turnover Ratio

c. Days’ sales in receivables

2. Considering each ratio individually, which ratios improved from 2015 to 2016 and which ratios deteriorated and determine whether the trend is favorable or unfavorable for the company.

Answer 8

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Answer 9

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Answer 11

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