The following amounts were reported by Sindarius Ltd. in its most recent statement of financial position:

The company had sales of $1,950,000 in 2020 and $1,990,000 in 2019. All sales were on account.

Required

a. Calculate the current ratio and quick ratio for Sindarius Ltd. for the current and preceding year. Comment on whether the ratios have improved or worsened.

b. If Sindarius’s bank loan includes covenants that the company must maintain a minimum current ratio of 1.5 and a minimum quick ratio of 0.7, what would you advise Sindarius’s management to do?

c. Calculate Sindarius’s accounts receivable turnover ratio and average collection period for the current and preceding years. For the accounts receivable turnover ratio, use the balance of accounts receivable at each year end for this calculation, rather than average balances. Comment on whether these ratios have improved or worsened.

d. If Sindarius’s normal credit terms are “n/45,” assess the company’s collection experience for the current and preceding years.

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2020 2019 $ 32,800 $ 99,500 Cash and cash equivalents Accounts receivable (net) 274,200 205,600 Inventory 628,900 475,600 Prepaid expenses 18,200 16,100 Property, plant, and equipment (net) 1,174,500 1,234,000 439,400 Accounts payable 308,200 Wages payable 29,700 31,700 Income tax payable 22,500 18,000 Unearned revenue 67,200 51,900 Long-term bank loan payable 815,000 895,000 Common shares 200,000 200,000 Retained earnings 554,800 526,000