The comparative financial statements of 4th Gear Website Design for 5 2008,2007 , and 2006 include the data shown here:

Requirements 1. Compute these ratios for 2008 and 2007 :

a. Current ratio

b. Acid-test ratio

c. Days' sales in receivables

2. Write a memo explaining to Les Arnold, the company owner, which ratios improved from 2007 to 2008 and which ratios deteriorated. Discuss whether this trend is favorable or unfavorable for the company. Use the memo format shown for Problem 9-25A.

Problem 9-25A

Mail Plus performs mailing services on account, so virtually all cash receipts arrive in the mail. Gina Star, the owner, has just returned from a meeting with new ideas for the business. Among other things, Star plans to institute stronger internal controls over cash receipts from customers.

Requirement 

Assume you are Gina Star. Write a memo to outline procedures that will ensure 

(1) all cash receipts are deposited in the bank

(2) all cash receipts are posted as credits to customer accounts receivable. Use the following format for your memo. 

Transcribed Image Text:

2008 (In thousands) 2007 2006 Balance sheet Current assets: Cash...... $ 20 Short-term investments 220 $ 20 $ 10 70 100 60 Receivables, net 190 150 120 Inventories........ 420 380 340 Prepaid expenses........ 30 30 20 Total current assets. $ 730 $ 680 $ 550 Total current liabilities.......... $ 480 $ 410 $ 380 Income statement Sales revenue $2,600 $2,500 $1,900