Question

S5-12 (similar to) Western Products reported the following amounts in its 2019 financial statements. The 2018 amounts are given for comparison. (Click the icon to view the financial data.) Read the requirements. Requirement 1. Compute Western's quick (acid-test) ratio at the end of 2019. Round to two decimal places. How does the quick ratio compare with the industry average of 0.92? Begin by selecting the formula, then enter the amounts and compute the quick (acid-test) ratio. (Abbreviation used: Cash* = Cash and cash equivalents. Round the quick (acid-test) ratio to two decimal places.) Cash* + Short-term investments + Net current receivables 1 Total current liabilities = Quick (acid-test) ratio 94,500 / 105,000 0.90 How does the quick (acid-test) ratio compare to the industry average of 0.92? Western's position is unfavorable compared to the industry average of 0.92. Requirement 2. Compare days' sales outstanding for 2019 with the company's credit terms of net 30 days. Begin by selecting the formula, then enter the amounts to calculate the days' sales outstanding. (Round interim calculations to two decimal places, XX.XX and the days' sales outstanding (DSO) up to the next whole day. 365 days / Accounts receivable turnover = Days' sales outstanding 365 = days

Answer 1

Accounts Receivable Turnover

= Credit sales/Average accounts receivables

= 757,900 / [(73,000+64,800)/2]

= 757,900/68,900

= 11 times

365 days	/	Accounts Receivable Turnover	=	Days sales outstanding
365	/	11	=	34 days

.

N