## Calculation of liquidity ratios current ratio and acid-test, Financial Accounting

Assignment Help:

 Calculation of Liquidity ratios Current Ratio and Acid-Test Ratio - 2008 2009 2010 A Inventory 1388168 2030972 2651760 B Current Assets 1784275 2353271 2905145 C Current Liabilities 992683 1340291 1743763 D Administrative Expenses 1338918 1797197 2319148 E Selling Expenses 89749 123639 165962 F Operational Expenses 1428667 1920836 2485110 Current Ratio (B / C) 1.80 1.76 1.67 Acid - Test Ratio [(B-A) / C] = 0.40 0.24 0.15 Defensive Interval period / ratio (in days) [B / (F / 360)] 450 441 421 Assumption - We have assumed the operational expenses to include "Administrative expenses" and "Selling Expenses" and a year to be of 360 days.

As shown by the ratios above all liquidity ratios i.e. Current Ratio, Acid Test ratio and Defensive Interval period are showing a declining trend from 2008 to 2010. This might be due to the global recession during that period. None of the ratios are increasing or improving after 2008 till 2010.

The liquidity position of the firm is not good as the best measure of liquidity i.e. the quick ratio is also declining continuously in 2009 and 2010 vis-à-vis the previous years.

#### Quarterly cash payments budget, Emily Jackson, RSC Designs management accou...

Emily Jackson, RSC Designs management accountant, is in charge of preparing the master budget for 2013.  She has gathered the following information: 1. Annual profit for the 201

#### Explain why the operating cycle, The Operating Cycle Two Wheeler Cycle Shop...

The Operating Cycle Two Wheeler Cycle Shop buys all of its bikes from one manufacturer, Baxter Bikes. On average, bikes are on hand for 45 days before Two Wheeler sells them. The c

#### What are the effects on current income, What are the effects on current inc...

What are the effects on current income and on future income, if a firm incorrectly capitalizes an expenditure that it should have expensed?   State your answer for both current inc

#### Maximum loss method, a,b,c carried on business and their profit and loss ra...

a,b,c carried on business and their profit and loss ratio 3:4:5.they decided dissolve the partnership as on 1st july,2011.the following balance sheet..... creditors-10000 loan A/c-

#### Operating leases, Staples INC has operating leases. Assuming a discount rat...

Staples INC has operating leases. Assuming a discount rate of 9%, adjust the current balance sheet for the presences of these leases. Which reported expenses would change if these

#### Prepare all journal entries for 2013, A summary of Jarvis Company's Decembe...

A summary of Jarvis Company's December 31, 2013, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group: Age Gro

#### Determine the contribution margin, You were recently hired by E&T Boats, In...

You were recently hired by E&T Boats, Inc. to assist the company with its financial planning and to evaluate the company's performance.  E&T Boats, Inc. builds and sells boats to o

#### Default risk premium , A Treasury bond that matures in 10 years has a yield...

A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 9%. Suppose that the liquidity premium on the corporate bond is 0.8%. What is th

#### Adjustments, Is goodwill a fictitious asset?

Is goodwill a fictitious asset?

#### Concepts in accounting, Mr. Inherits 30000. Decides to open a salon jj salo...

Mr. Inherits 30000. Decides to open a salon jj salon. On 1/4/2016 commits 10000 to the business Opens an a/c in the bank What will be the money under capital in his books on 1/4/10

### Write Your Message!

#### Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!