solve the following:
current ratio acid test
avg day's collection
Current assets $18,000 A/R 3,000, C/L 16,000 Inventory 2,000, Net sales 41,000 total assets 29,000 net income 6,000
Current ratio = Current assets/Current liabilities
Acid test = (Current assets - Inventory)/Current liabilities
= ($18,000 - $2,000)/$16,000
In acid test, we take current assets minus inventory because value of cash and other current assets are not provided.
Average day's collection = (Days * Accounts Receivable)/Sales
= (365 * $3,000)/$41,000
Assets turnover = Sales/Total Assets
Profit Margin = Net income/Net sales
= 0.1463 or 14.63%
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