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When a firm guarantees a bank loan for a joint venture in which it participates and the joint venture is handled as an investment.
Compute the times interest earned.Compute the cash basis times interest earned.
Compute the times interest earned. Compute the fixed charge coverage.
Give the implications and the limitations of each item separately and then the collective influence that could be drawn from them about Arodex Company.
The company's fiscal year ends on December 31, and it uses the straight-line method to amortize bond premiums or discounts.
It is contended that this procedure will enable the firm to expand inventory, which will in turn enable the firm to generate more sales.
What is the reason for separating current assets from the rest of the assets found on the balance sheet?
Rachit Company has cash that has been frozen in a bank in Cuba. Should this cash be classified as a current asset? Discuss.
List the two computations that are used to determine the liquidity of receivables.
Comment on the expected liquidity of its receivables, based on the days' sales in receivables and the accounts receivable turnover.
Explain how a company that uses a natural business year or ends its year when business is at a peak can eliminate the distortion in its liquidity computations.
Describe the difference in inventories between a firm that is a retail company and a firm that is a manufacturing concern.
The number of days' sales in inventory relates the amount of the ending inventory to the average daily cost of goods sold.
In general, does a company want many days' sales in inventory?
How should you proceed to compute days' sales in inventory? Will this procedure produce a realistic days' sales in inventory?
If the book figures are based on cost, will the results of the preceding computations tend to be understated or overstated?
Both current assets and current liabilities are used in the computation of working capital and the current ratio.
In determining the short-term liquidity of a firm, the current ratio is usually considered to be a better guide than the acid-test ratio.
Discuss why some firms have longer natural operating cycles than other firms.
Is the profitability of the entity considered to be of major importance in determining the short-term debt paying ability? Discuss.
When a firm faces an inflationary condition and the LIFO inventory method is based on a periodic basis, purchases late in the year can have a substantial.
Before computing the acid-test ratio, compute the accounts receivable turnover.
A relatively low sales to working capital ratio is a tentative indication of an efficient use of working capital.
List three situations in which the liquidity position of the firm may not be as good as that indicated by the liquidity ratios.
P. Gibson Company has computed its accounts receivable turnover per year to be 12.