Question

Instructions For 2017 and 2018, calculate current ratio, quick (acid-test) ratio, inventory turnover and days' inventory outstanding (DIO), accounts receivable turnover, days' sales in average receivables or days' sales outstanding (DSO), accounts payable turnover, days' payable outstanding (DPO), and cash conversion cycle (in days). a. Use the cost of goods sold in the formula for accounts payable turnover. b. Use a 365-day year for calculations as needed. c. Use cell references from prior calculations, if applicable. (Always use cell references and formulas where appropriate to receive full credit. If you copy/paste from the Instructions tab you will be marked wrong.) Total Points

Answer 1

Ratios have been evaluated from the given data and evaluation of turnover, liquidity and current debt paying ablilities are explained in the written notes.
1) Current Ratio = 2) Current current Asset liabities. Acld Test Ratio = Quick Assets Current liabitities Current Assets include cash, short term investment, Accounts receivable free prepaid expenses Quick Assets means liquid assets (which includes cach and cash equivalents). It doesn't include inventory, prepaid expenses In the given question, liquid assets are cash , Net receivable & short term investments - (in $) 2018 2017 Current Assets : اور It is within assumed that short team investments will mature 90 days. Hence, included in quick assets. short Term Irrestments Net Receivables Truentary Prepaid Expenses 77000 1800 8190 96000 7000 10300 20000 840 700 6000 Quick Assets 2018 2017 Total (A) 279000 283000 Cash Short-Term trestment Net Receivables 77 000 18.000 81000 103 0 2.000 84000 current liabilities 130000 97000 Total 1+6000 207000 Current Ratio = 279000 13000 = 2.146: ) 283000 97000 2.918 :) Acid Test 2.0 700 Ratio - 1760000 13 000 = 1.354) 97000 2 - 1340)

3) Inventory F Turnover - Cast of Goods sold o ancrage Frientory cruentory = opening frientory + closing mentory (4) Days Inventory outstanding = Averagestock 4365 cost of goods sold Average Stock is taken from Paint mo. (3) Average 2018: 2017 2018 2017 Days Inventory 83000 365 6400D x 365 opening Inventory 70000 96000 58000 +0000 outstanding: 280000 X365 278 clering gruentory Average quentry = 108-196 days h 84.028 days 83000 640 Cost of goods sold 280000 278.000 Inventory Turnover = 280000 830 = 3.373:1 1.e 3.373 times 278000 64000 4.3441

5 Receivable Turnover Net credit sales. Average Account receivables © Days en Days Sales outstanding = Account Receivable x Acrouter O Total credit sales Period 2018 2017 i.e. Average 85000 Account Receivables Average daly credit sales opening Account : 84000 receivable closung Account : 81000 receivable 84000 2018 2017 Account Receivables 81000 84000 tug Account Receivable - 82500 5950 Net credit sales 493000 507000 Het credit sales 493000 Sowo Days sales outstanding -7 81000 4365 Receivables Tuonguee 493000 8 250 S0100 59500 493000 8400 365 507000 - 59.969 60.473 = 5.975 il = 8.521:1 dar days

(7) Payable Turnover cost of goods sold Average Account Payable It is asked in the question to use Cost of goods sold instead of total Purchase in the formulae. 3 (8) Days Payable outstanding Accounts payable & cost of goods sold a Days in period ie 365 Ament (in $ 2018 2017 2018 2017 = 4500 X365 35000 x365 28 000 278000 35000 40000 opening Accounts Payable : losing Accounts :: = 58.661 days 45.953 days 45000 35000 Average Accounts lable : 400 00 37500 27800 Cost of goods seld: 280000 Payable Turnoner = 2800.00 40000 7 time 27800 37500 7.413 times =

2018 2018 19) Cash conversion cycle : Days sales cutstanding & Days Inventory outstanding - days payable outstanding from point (6), (4) and 18) 2.9188 2.134.1 4.344 times 84.028 days 2018 2017 Current Ratio 20146:1 Quick Ratio 1.354:1 Iventory Turnoner 3.373 times Days Inuentory outstandig 108. 196 days Receivables Turnover 5.975 times. Days sales outstanding 59.969 days Payables Turnover 7 times 8 • Pays Payable outstandig 58.661 days Cash conversion cycles logoso 4 days 60.473 S4.028 Days sales outstanding days Irventory outstanding ess: Days Payable outstanding 59.969 108.196 158.661) 8.521 times 60.473 days 7.413 times 45.953 days 98.548 days (45.953) 1090504 days 98.348 days