Question

1. If a retailer collects on charge sales almost immediately, zero excess days A. can be...

1. If a retailer collects on charge sales almost immediately, zero excess days

A. can be evidence of a retailer’s power over its suppliers.

B. would indicate the retailer’s customers are, in effect, paying its suppliers.

C. can indicate the retailer’s cash situation is worrisome.

D. both A and B are correct.

2. A high quick ratio could result from a firm’s

A. inability to collect its accounts receivable.

B. inability to sell its merchandise inventory.

C. both A and B are correct.

D. none of the above is correct.

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Homework Answers

Answer #1

1) Option A.
Since the payments are being made immediately , it reflects less substitute availability and that the retailer has greater power of retailers for demanding from customers without the fear of loosing them.

2) Option D.
None of the above is correct.
Quick ratio includes account receivables, ability or inability of its collection is not reflected accurately ,hence even quick ratio is not a true representation of the liquidity position of the firm. The inventories,are excluded from the current assets, a greater deductible would rather decrease the quick ratio. Hence both incorrect.

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