Question

______1. Which of the following would indicate that the firm may be carrying excess inventory?

1. A rise in total asset turnover
2. A decline in the current ratio
3. A decline in sales  
4. A decline in the quick ratio while current ratio remains stable
5. A decline in days’ sales in inventory

                                       

2.   The following data are taken from the sheet at the end of the current year:

Cash                                                                         543,000

Short-term Investments                                   826,000

Notes Payable, long-term                                235,000

Prepaid Insurance                                                 70,000

Accounts Payable                                               902,000

Accrued Liabilities                                               526,000

Inventory                                                          1,625,000

Accounts Receivable                                          117,000

Salaries Payable                                                  165,000

Intangible Assets                                                 500,000

Property, Plant and Equipment                1,800,000             

            

                                                          Computation          Interpretation—what does the result mean?

Compute:     a. Working capital: ___________________   __________________________________

b. Current ratio:       ___________________   __________________________________

         c. Quick ratio:           ___________________   __________________________________

d. Consider the additional information. Compare results and interpret your findings: Are the results acceptable?   Explain.

1. Current ratio, prior year: 1.5

2. Industry average: 1.0

EasyDo, Inc. presents the following data for December 31, 2018.

Inventories, beginning of year	$  906,500
Inventories, end of year	678,800
Cost of Goods Sold	5,580,000
Net Sales	7,625,500

______3. The inventory turnover in days (use average inventory) is:

a. 44.4

b. 26.8

c. 51.8

d. 37.9

e. 7.0

______4. The prior and current year results for Days’ Sales in Inventory are:

1. Using information above: Complete 2018

	2018	2017	2016
Days’ Sales in Inventory		53.8	35.9

2. T or F: This trend indicates the company is improving its efficiency and effectiveness in managing inventory from the previous year, but is not as effective as its 2016 performance.

   

______5. If merchandise inventory is being valued at cost and the price level is consistently rising (inflation), which method of costing will yield the largest gross profit and higher current ratio?

a. Average cost

b. FIDO

c. LIFO

d. FIFO

e. Next in, First out

_____6. Which of the following types of businesses would normally have the shortest operating cycle?

a. Retail clothing store

b. Grocery store

c. Wholesale furniture store

d. Car manufacturer

e. Car dealer

_____7. Pepsico presents the following data for the year ended December 31, 2018 (millions).

Receivables, net, beginning of year Receivables, net, end of year		$ 7,024 7,142
Net Sales		64,661
Cost of Goods Sold		29,381

Allowance for Doubtful Accounts = $129M, Beginning of year and $101M, end of year.

The days’ sales in receivables (ACP) using 365 days is:

a. 40.9

b. 81.3

c. 41.1

d. 40.1

e. 40.4

Answer 1