Gellis Appliances, Inc., located in central Michigan, is a small manufacturer of washing machines and dryers. Gellis sells most of its appliances to large, established discount retail companies that market the appliances under their own names. Gellis sells the appliances on trade credit terms of n/60. If a customer wants a longer term, however, Gellis will accept a note with a term of up to nine months. At present, the company is having cash flow troubles and needs $10 million immediately. Its cash balance is $400,000, its accounts receivable balance is $4.6 million, and its notes receivable balance is $7.4 million.

How might Gellis Appliance’s management use its accounts receivable and notes receivable to raise the cash it needs? What are the company’s prospects for raising the needed cash?

Interpreting Financial Reports Comparison and Interpretation of Ratios