Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem P9.41BPGB
Using ratio data to evaluate a company’s financial position
Leaming Objective 5
1. Days’ sales in receivables (2018) 18 days
The comparative ?nancial statements of Newton Cosmetic Supply for 2018, 2017 and 2016 include the data shown here:
| 2018 | 2017 | 2016 | |
| Current Assets: | |||
| Cash | $ 80,000 | $50,000 | $20,000 |
| Short-term investment | 150,000 | 170,000 | 125,000 |
| 310,000 | 260,000 | 220,000 | |
| Merchandise Inventory | 360,000 | 335,000 | 330,000 |
| Prepaid Expenses | 50,000 |
30,000 |
35,000 |
| Total Current Assets | 950,000 | 345,000 | 740,000 |
| Total Current Liabilities | 530,000 | 630,000 | 670,000 |
| Income statement—partial | |||
| Net Sales (all on account) | 5,850,000 | 5,110,000 | 425,000 |
Requirements
1. Compute these ratios for 2018 and 2017:
a. Acid-test ratio (Round to two decimals.)
b. Accounts receivable turnover (Round to two decimals.)
c. Days‘ sales in receivables (Round to the nearest whole day.)
2. Considering each ratio individually, which ratios improved from 2017 to 2018 and which ratios deteriorated? ls the trend favorable or unfavorable for the company?
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Chapter 9 Solutions
Horngren's Accounting (12th Edition)
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