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Alyvia has obtained the following data at 31 December 2020 in respect of Justin, a possible new customer. $ Trade receivables 18,460 Cash and cash
Alyvia has obtained the following data at 31 December 2020 in respect of Justin, a possible new customer.
$ | |
Trade receivables | 18,460 |
Cash and cash equivalents | 5,230 |
Inventory | 34,200 |
Trade payables | 28,560 |
Sales for the year | 339,840 |
Gross profit | 56,640 |
i. Calculate the following ratios for Alyvia's business to two decimal places: a. Current ratio b. Liquid (acid test) ratio c. Rate of inventory turnover
ii. Alyvia has also obtained the following data in respect of Carmen, another possible customer.
Current ratio | 4:1 |
Liquid (acid test) ratio | 1.62:1 |
Rate of inventory turnover | 8 times per year |
Alyvia's main concern when choosing the customer is that they should pay her promptly. Advise Alyvia which customer she should choose. Justify
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