8.Platinum Corporation belongs to the rubber tire trading industry. Its most recent balance sheet and income statement appear below:

Statement of Financial Position

December 31, Year 2 and Year 1

(in thousands of dollars)

Year 2

Year 1

Assets

Current assets:

Cash................................................................

$30

$110

Accounts receivable.......................................

210

260

Inventory........................................................

190

170

Prepaid expenses............................................

70

70

Total current assets............................................

500

610

Plant and equipment, net...................................

810

740

Total assets........................................................

$1,310

$1,350

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable...........................................

$140

$150

Accrued liabilities..........................................

30

30

Notes payable, short term..............................

40

40

Total current liabilities......................................

210

220

Bonds payable...................................................

190

240

Total liabilities..................................................

400

460

Stockholders' equity:

Preferred stock, $100 par value, 5%..............

100

100

Common stock, $2 par value.........................

400

400

Additional paid-in capital-common stock.....

130

130

Retained earnings...........................................

280

260

Total stockholders' equity.................................

910

890

Total liabilities & stockholders' equity.............

$1,310

$1,350

Income Statement

For the Year Ended December 31, Year 2

(in thousands of dollars)

Sales (all on account)..........................................

$1,260

Cost of goods sold..............................................

770

Gross margin.......................................................

490

Selling and administrative expense....................

400

Net operating income..........................................

90

Interest expense..................................................

26

Net income before taxes.....................................

64

Income taxes (30%)............................................

19

Net income..........................................................

$45

Required:

A.Compute the following for Year 2:

a.Working capital.

b.Current ratio.

c.Acid-test ratio.

d.Accounts receivable turnover.

e.Average collection period.

f.Inventory turnover.

g.Average sale period

B.What can you say about the company's short-term liquidity?

C.If the industry average in terms of collection period is 45 days, and inventory turnover is 6 times, how is the company performing compared to the industry?