Selected nancial information for Harrison Inc is shown next in
Selected financial information for Harrison, Inc. is shown next (in thousands).
(a) What account creates the difference between gross and net accounts receivable? What does this account represent?
(b) Calculate the quick ratios for years 1 and 2.
(c) Calculate the accounts receivable turnover ratio and age of receivables for year 2.
(d) Why can the accounts receivable turnover ratio not be calculated for year 1?
(e) Assume that, in year 3, the economy took a downturn, and interest rates rose substantially. What would you expect to happen to the accounts receivable turnover ratio and the age of receivables relative to those calculated in part (c)? Explain the rationale for your answers.
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