Franklin Ltd., a gift store, reported the following amounts in its 2017 financial statements. The 2016 figures are given for comparison.

Required
1. Determine whether Franklin Ltd.'s acid-test ratio improved or deteriorated from 2016 to 2017. 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 2017 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.

2017 2016 Current assets $12,000 46,000 $ 26,000 Short-term investments Accounts receivable $120,000 20,000 $148,000 Less: Allow. for uncollectibles Inventory Prepaid insurance Total current assets 100,000 384,000 4,000 $546,000 $ 218,000 $1,460,000 18,000 ,000 378,000 4,000 $560,000 $ 224,000 $1,464,000 130 Total current liabilities Net sales