Question

Financial information for Cao Inc. follows.
Income Statement
For the Year Ended December 31, 2011
Instructions
(a) Calculate the following ratios or relationships of Cao Inc. Assume that the ending account balances are representative unless the information provided indicates differently.
1. Current ratio
2. Inventory turnover
3. Receivables turnover
4. Average age of receivables (days sales outstanding)
5. Average age of payables (days payables outstanding)
6. Earnings per share
7. Profit margin on sales
8. Rate of return on assets
(b) For each of the following transactions, indicate whether the transaction would improve, weaken, or have no effect on the current ratio of Cao Inc. at December 31, 2011.
1. Writing off an uncollectible account receivable for $2,200
2. Receiving a $20,000 down payment on services to be performed in 2012
3. Paying $40,000 on notes payable (short-term)
4. Collecting $23,000 on accounts receivable
5. Purchasing equipment on account
6. Giving an existing creditor a short-term note in settlement of an open account owed


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  • CreatedAugust 23, 2015
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