Question

The companh"ırwoial statements of Kenneru Pool, h, kr 200, 2019, and 2018included the flowhาฏ eleddata: EEE (Cilck the icon to view the comparative financal data Read the equiments Requirement 1. a Compute the cument ratios for 2020 and 2019. (Round your final anowers to two declmal places, X0xx) 2020 2019 Current ratio. Requirement1.b.Cornute quick (add-test)naos br 2020 and 2019. (Round your final answers totw。dedral xxx.) 2020 2019 Quick (acid-test) rado Requirement 1.e.Compute the days sales outstanding for 2020 and 2019. (Round interdim calculations to two decimal places,XOX.XX and the amounts you enter into the answer baxes (DSO) up to the next whol 2019 Days' sales outstanding (osO)daysdys Requirement 2. Which ratios improved from 2019 to 2020 and which ratios deteriorated? Is this trand fevorable or unfavorable? The current ratio Requirement 3. Recommend two ways for Kenmore Pools to improve cash flows from recelvables Kenmore Pools can improve cash flows from receivables by eilther 匚 ' from 2019 to 20 0 The quick- from 2019 to 2020. The days' sales outstanding .' from 2019 to 2020. The quick ratio fon 2019 to 202. The day-Sales outstanding This trend This tend theonpry ▼I and/or Enter any number in the edilit fields and then continue to the next question

Answer 1

Answer

1a.

Current Ratio for 2019 = Total Current Assets $\div$ Total Current Liabilities

= $890 $\div$ $620 = 1.44 (rounded of 2 decimal poits)

Current Ratio for 2020 = Total Current Assets $\div$ Total Current Liabilities

= $860 $\div$ $550 = 1.56

1b. Quick Ratio for 2019 = (Cash+ investment in trading securities + Account receivable) $\div$ Current Liabilities

=$(90+170+240) $\div$ 620 = $500 $\div$ $620 = 0.81

Quick Ratio for 2020 = $(70+150+250) $\div$ $550 = $470 $\div$ $550 = 0.85

1c.

Days Sales Outstanding Ratio = Account Receivables $\div$ (Net Sales on account $\div$ 365days)

for 2019 = $240 $\div$ ($4,830 $\div$ 365days) = 18.14 days

for 2020 = $250 $\div$ ($6,615 $\div$ 365days) = $250 $\div$ 13.232876= 13.79 days

Q2. Which Ratio Improved from 2019 to 2020 and which ratios deteriorated.

Answer:

Current ratio in 2019 is 1.44 and in 2020 it is 1.56. Thus, it is improving and providing more liquidity.

Quick Ratio in 2019 is 0.81 and in 2020 it is 0.85. It is improving and aids to quick paying ability.

DSO ratio in 2019 is 18.14 days whereas in 2020- 13.79 days. It is also improving over previous year.

Q3. Two ways to improve Cash flow from receivables:

Kenmore Pools can improve cash flow by selling old inventories.

Collecting Early from customer by providing small discounts of 1 or 2%.