accounting 411 financial analysis actual exam with complete solutions
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Course
Accounting 411 financial analysis
Institution
Accounting 411 Financial Analysis
do you expect the company to be able to pay its bills? - CORRECT ANSWER--current ratio=CA/CL
-if current assets exceed current liabilities, you can expect to pay your bills
-1350/500=2.7=yes
on average, how many days is it taking the company to collect its accounts receivables? is there a pr...
accounting 411 financial analysis actual
exam with complete solutions
do you expect the company to be able to pay its bills? - CORRECT ANSWER--current
ratio=CA/CL
-if current assets exceed current liabilities, you can expect to pay your bills
-1350/500=2.7=yes
on average, how many days is it taking the company to collect its accounts receivables?
is there a problem? if so how severe? (net 30) - CORRECT ANSWER--AR
Turnover=sales/average AR
-5,000,000/600,000=8.33 times a year
-365/8.33= 43.8 days to collect
-this is saying we either collect, on average, two weeks late, or we have unaddressed
bad debt
on average, how many days is it taking the company to sell its inventory? - CORRECT
ANSWER--inventory turnover=COGS/average inventory
-3,250,000/400,000=8.125
-365/8.125=44.9 days
what is the company's gross profit ratio? - CORRECT ANSWER-GP/sales
1,750,000/5,000,000=.35
considering the gross profit ratio (.35), approximately how many new sales are
necessary to recoup the out-of-pocket cost of a bad debt or spoiled/obsolete products?
how does this effect the company credit policy, amount of inventory, and ability to incur
selling expenses? - CORRECT ANSWER--sales (COGS)=GP
1-x=.35; x=.65
-higher COGS= tighter credit policy, little excess inventory, little money to promote
-higher GP= looser credit policy, lots of excess inventory, more money to promote
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