The financial statements of Big City News, Inc., include the following items:

Requirements

1. Calculate the following ratios for 2018 and 2017. When calculating days, round your answer to the nearest whole number.

a. Current ratio

b. Quick (acid-test) ratio

c. Inventory turnover and days’ inventory outstanding (DIO)

d. Accounts receivable turnover

e. Days’ sales in average receivables or days’ sales outstanding (DSO)

f. Accounts payable turnover and days’ payable outstanding (DPO). Use cost of goods sold in the formula for accounts payable turnover.

g. Cash conversion cycle (in days)

2. Evaluate the company’s liquidity and current debt-paying ability for 2018. Has it improved or deteriorated from 2017?

3. As a manager of this company, what would you try to improve next year?

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2018 2017 2015 Balance sheet: $ 53,000 $ 89,000 Cash. Short-term investments 10,000 33,000 Net receivables .. 77,000 80,000 35,000 Inventory. 91,000 75,000 58,000 Prepaid expenses.. 6,000 6,000 Total current assets 237,000 283,000 Accounts payable 55,000 45,000 50,000 . Total current liabilities. 134,000 91,000 Income statement: Net credit sales . $497,000 $ 503,000 Cost of goods sold... 275,000 286,000