Homework: Financial Ratios

Given the information below, for 2013 and 2014, calculate the current ratio, quick ratio, accounts receivable turnover, and collection period. Include both your calculations and a brief explanation (3-4 sentences) to explain the ratio and what the resulting change from 2013 to 2014 might mean for the company.

Note: The term income from operations is equivalent to the term sales.

2014 2013 Cash-------------------------------------- $ 30,000 $ 20,000

Short term investment---------------- 37,000 18,000

accounts receivable net -------------- 120,0000 140,000

inventory -------------------------------- 290,000 320,000

prepaid expenses ---------------------- 7,000 10,000

total assets -----------------------------600,000 750,000

total current liabilities ---------------- 220,000 200,000

long term note payable -------------- 150,000 185,000

income from operation -------------- 145,000 180,000

interest expenses ------------------- 22,000 26,000