Below are the selected financial dats for Community Services and Food Bank at th

Question

Below are the selected financial dats for Community Services and Food Bank at the end of the current year Item Community Services 675,000 50,000 504,000 51,000 75,000 84.000 105,000 Food Bank Net credit sales Cash sales Cost of goods sold Cash Accounts receivable (net) Inventory Current liablities 560,000 75,000 480.000 20,000 70,000 60,000 100,000 Assume that the year-end balances shown for accounts receivable and for inventory approximate the average balances of these items throughout the year Required: a. For each of the two companies, compute the following: Working capital 2. Current ratio 3. Quick ratio 4. Number of times inventory turned over during the year and the average number of days required to turn over inventory (round computation to the nearest day) 5. Number of times account receivable turned over during the year and the average number of days required to collect accounts receivable (round computation to the nearest day) From the viewpoint of a short-term creditor, comment on the quality of each organization's working capital. To which company would you prefer to sell $20,000 in goods on a 30-day open account? b.

Explanation / Answer

As per chegg's policy I am allowed to answer only the first 4 parts of a question so please don't mind and ask other questions separately.

1. Working capital = current assets - current liabilities

= (Cash + Accounts receivables + inventory) - current liabilities

For community service,

WC = (51000+75000+84000)-105000

= 105000

For food bank,

WC = (20000+70000+160000)-100000

= 150000

2. Current Ratio = Current assets/current liabilities

For community services, CR = 210000/105000

= 2

For food bank, CR = 250000/100000 = 2.5

3. Quick Ratio = (Cash + Account receivable)/current liabilities

For community services,

= (51000+75000)/105000 = 1.2

For food bank, QR = (20000+70000)/100000 = 0.9

4. Inventory turnover ratio = cost of goods sold/inventory

For community services, = 504000/84000 = 6

For food bank, = 480000/160000 = 3

No. of days required for inventory turnover = 365/inventory turnover ratio

For community services, = 365/6 = 60.83

For food bank, = 365/3 = 121.66

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