The comparative financial statements of Diamond Pools, Inc., for 2020, 2019, and 2018 included the following select data:

Requirements

1. Compute the following ratios for 2020 and 2019:

a. Current ratio

b. Quick (acid-test) ratio

c. Days’ sales outstanding

2. Which ratios improved from 2019 to 2020 and which ratios deteriorated? Are each of the trends favorable or unfavorable?

3. Recommend two ways for Diamond Pools to improve cash flows from receivables.

Transcribed Image Text:

(In millions) 2020 2019 2018 Balance sheet Current assets: $ 90 $ 95 $ 60 Cash . Investment in trading securities.. Receivables, net of allowance for uncollectible accounts of $7, $6, and $4, respectively 150 180 115 270 280 230 340 Inventories 355 325 Prepaid expenses.. 40 50 35 $ 900 $ 550 $ 950 $ 640 $ 765 $ 650 Total current assets Total current liabilities.. Income statement Net sales (all on account) $7,700 $5,355 $4,745