Use the information provided about Fairplay Inc. in E12-5 to respond to the following.
a. Calculate the following for 2017 and 2018:
i. Current ratio
ii. Quick ratio
iii. Accounts receivable turnover ratio
iv. Average collection period of accounts receivable
v. Inventory turnover ratio
vi. Average number of days inventory on hand
vii. Accounts payable turnover ratio
viii. Average payment period for accounts payable
ix. Cash lag
b. Assume the role of an important new supplier to Fairplay. Use the amounts calculated in (a) to prepare a report assessing whether Fairplay should be granted credit terms for purchases from your company. Explain the conclusions you make.