The Robinson company has the following current assets and current liabilities fo

Question

The Robinson company has the following current assets and current liabilities for these two years: Cash and marketable securities $50,000 50,000, Accounts receivable $300,000 350,000, Inventories $350,000 500,000, Total Current Assets $700,000 900,000, Accounts payable $200,000 250,000, Bank loan $0 150,000, Accruals $159,000 200,000, Total Current Liabilities $350,000 600,000. If the sales in 2010 were 1.2 million, sales in 2011 were 1.3 million, and cost of goods sold was 70 percent operating cycles and cash conversion cycles in each of these years? What caused them to change during this time? AR period 2010 and 2011 and Inventory period 2010 2011 I need to now the configurations to find the AF Period and Inventory Period.

Explanation / Answer

Current Ratio is calculated as: Current Assets / Current Liabilities Here it is: 2011 $700,000 / $350,000 = 2 2012 $900,000 / $600,000 = 1.5 Higher is better, so a drop from 2.0 to 1.5 indicates a degradation of the company's liquidity Quick Ratio is measured as: (Current Assets - Inventory) / Current Liabilities Here it is: 2011 ($700,000 - $350,000) / $350,000 = 1.0 2012 ($900,000 - $500,000) / $600,000 = 0.667 Again, the ratio has declined in 2012 indicating a worsening of the company's liquidity.

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