Rapid Corp. significantly reduced its requirements for credit sales. As a result, sales during the current year

Question:

Rapid Corp. significantly reduced its requirements for credit sales. As a result, sales during the current year increased dramatically. It had receivables at the beginning of the year of $35,000 and ending receivables of $195,000. Sales were $380,000.

Instructions

(a) Determine cash collections during the period.

(b) Discuss how your findings in part (a) would affect Rapid Corp.’s quality of earnings ratio. (Do not compute.)