Franklin Ltd., a gift store, reported the following amounts in its 2014 financial statements. The 2013 figures
Question:
Franklin Ltd., a gift store, reported the following amounts in its 2014 financial statements. The 2013 figures are given for comparison.
Required
1. Determine whether Franklin Ltd.'s acid-test ratio improved or deteriorated from 2013 to 2014. How does Franklin Ltd.'s acid-test ratio compare with the industry average of 0.90?
2. Compare the days' sales in receivables measure for 2014 with the company's credit terms of net 30. What action, if any, should Franklin Ltd. take?
3. Indicate the most likely effect of the following changes in credit policy on the days' sales in receivables (+ for increase, - for decrease, and NE for no effect).
a. Granted credit to people with poor credit history.
b. Increased collection techniques or methods.
c. Granted credit with discounts for early payment.
Step by Step Answer:
Accounting Volume 1
ISBN: 978-0132690096
9th Canadian edition
Authors: Charles T. Horngren, Walter T. Harrison, Jo Ann L. Johnston, Carol A. Meissner, Peter R. Norwood