Shaw Communications Inc. is a diversified Canadian communications company whose core operating business is providing broadband cable television services, internet, telecommunications services, satellite services, and programming content. The following selected information (in millions) was taken from Shaw’s financial statements for the fiscal years 2017 to 2019:

Additional details about Shaw’s receivables include the following:
Bad debt expense (or provision for doubtful accounts, as Shaw calls it) of $40 (2018, $38; 2017, $40) is included in operating, general,
and administrative expenses. Shaw writes off uncollectible accounts receivable against the allowance account based on the age of the account and payment history.

Instructions

a. Calculate the current ratios, acid-test ratios, receivables turnover ratios, and collection periods for fiscal 2019 and 2018. Comment
on Shaw’s liquidity for each of the years.

b. Based on the information provided, calculate the amount of accounts receivable that was written off in 2019.

c. Shaw indicates in its notes to the financial statements that it reduces the risk of uncollectible accounts by billing in advance of providing service. How does billing in advance of providing service reduce the risk of uncollectible accounts?

Transcribed Image Text:

2019 Operating revenues (assume all credit) $5,340 $5,189 Cash 1,446 384 Accounts receivable (gross) 305 Allowance for doubtful accounts 59 Inventories 61 2018 2017 $4,882 507 370 278 98 48 86 59 412 383 327 2,835 1,615 1,391 Other current assets Total current liabilities