Problem 1: Liquidity Analysis
The following selected information is taken from the financial statements of Arnn Company for its most recent year of operations:
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Beginning balances:
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Inventory
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$200,000
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Accounts receivable
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300,000
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Ending balances:
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Inventory
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$250,000
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Accounts receivable
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400,000
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Cash
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$100,000
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Marketable securities (short-term)
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200,000
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Prepaid expenses
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50,000
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Accounts payable
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175,000
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Taxes payable
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85,000
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Wages payable
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90,000
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Short-term loans payable
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50,000
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During the year, Arnn had net sales of $2.45 million. The cost of goods sold was $1.3 million.
Required:
Note: Round all answers to two decimal places.
• Compute the current ratio.
• Compute the quick or acid-test ratio.
• Compute the accounts receivable turnover ratio.
• Compute the accounts receivable turnover in days.
• Compute the inventory turnover ratio.
• Compute the inventory turnover in days.