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........................................

Year 2 $30

Year 1 $110

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

Year 2...... 210

Year 1........... 260

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

Year 2......190

Year 1........... 170

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

Year 2...70

Year 1......70

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

Year 2... 500

Year 1...... 610

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

Year 2. 810

Year 1......740

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

Year 2....... $1,310

Year 1.....$1,350

Liabilities and Stockholders' Equity

Current liabilities:

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

Year 2.....$140

Year 1..... $150

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

Year 2... 30

Year 1...30

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

Year 2..... 40

Year 1......40

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

Year 2... 210

Year 1... 220

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

Year 2...190

Year 1..... 240

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

Year 2....400

Year 2....460

Stockholders' equity:

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

Year 2..... 100

Year 1......100

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

Year 2......400

Year 1........400

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

Year 2........ 130

Year 1..........130

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

Year 2280

Year 1260

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

Year 2 910

Year 1890

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

Year 2...... $1,310

Year 1.......$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?