The following information applies to Markham Company:
Additional information: Net credit sales equal $220,000 and beginning accounts receivable were $11,000.Required:Compute Markham's:(a) Quick ratio(b) Current ratio(c) Working capital(d) Accounts receivable turnover(e) Average days to collect receivablesRound your answers to two decimal places.
What will be an ideal response?
(a) 1.27
Quick ratio = ($6,000 + $13,000) ÷ ($5,000 + $10,000) = 1.27
(b) 2.33
Current ratio = ($6,000 + 13,000 + $16,000) ÷ ($5,000 + $10,000) = 2.33
(c) $20,000
Working Capital = ($6,000 + $13,000 + $16,000) ? ($5,000 + $10,000) = $20,000
(d) 18.33 times
Accounts Receivable Turnover = $220,000 ÷ (($11,000 + $13,000) ÷ 2)) = 18.33 times
(e) 365 ÷ 18.33 = 19.91
Average days to collect receivables = 365 ÷ 18.33 = 19.91
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