QS $13-20$

Analyzing short$-$term financial condition

A$1$

Following is information for Morgan Company and Parker Company, which are similar firms operating in the same industry.

$1.$Based on current ratio and acid$-$test ratio, which company appears better positioned to pay current liabilities?

$2.$Based on accounts receivable turnover, which company converts its receivables into cash more frequently?

$3.$Based on inventory turnover, which company appears to hold inventory for the least amount of time?

b$.$Days$$ sales in inventory is increasing, from $22$ days to $38$ days.

c$.$Profit margin is decreasing, from $25\%$ to $19\%.$

d$.$Return on total assets is increasing, from $12\%$ to $16\%.$