Question

Highland Products reported the following amounts in its 2019 financial statements. The 2018 amounts are given for comparison.

Data Table 2019 2018 Current assets: $ 9,200 $ 9,200 12,000 Short-term investments 16,000 . ..- Accounts receivable $ 81,500 (7,500) 76,000 191,000 2,300 290,500 108,000 736,000 Less: Allowance for uncollectibles 73,500 (5,500) 190,000 2,300 291,000 105,000 971,750 Prepaid insurance

Answer 1

1)Quick ratio = Quick asset /current liabilities

where quick asset = total current asset - Inventories- prepaid expense

            2019: = 291000-190000-2300= 98700

Quick ratio : 98700/105000 = .94

Highland position is better/Favorable compared to industry.

2)Days sales outstanding = 365/ Accounts receivable turnover

                = 365 /13

               = 28.08 [rounded to 29days]

**Accounts receivable turnover = Net sales 2019 /Average accounts receivable

            = 971750 /[(73500+76000)/2]

             =971750 / [149500/2]

            = 971750 /74750

              =13

Highland's days sales outstanding is under the credit terms of net 30 days