Question: As lending officer for Prudent Bank you are analyzing the

As lending officer for Prudent Bank, you are analyzing the financial statements of ZETA Corporation (see Case CC-2 in the Comprehensive Case Chapter for data) as part of ZETA's loan application. Your superior requests you evaluate ZETA's liquidity using the two-year financial information available. The following additional information is acquired (in $ thousands): Inventory at January 1, Year 5, $32,000.

Required:
a. Compute the following measures for both Years 5 and 6:
(1) Current ratio.
(2) Days' sales in receivables.
(3) Inventory turnover.
(4) Days' sales in inventory.
(5) Days' purchases in accounts payable (assume all cost of sales items are purchased).
(6) Cash flow ratio.
b. Comment on any significant year-to-year changes identified from the analysis in (a).


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  • CreatedJanuary 22, 2015
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