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QUESTION 3 Teras Company had the following comparative current assets and current liabilities: During the year 2022, credit sales and cost of goods sold were

QUESTION 3 Teras Company had the following comparative current assets and current liabilities:

During the year 2022, credit sales and cost of goods sold were RM600,000 and RM350,000, respectively. Note: Assume it has 365 days in a year.

2022 2021
current asset
cash 20,000 30,000
short-term investment 40,000 10,000
note receivables 60,000 50,000
accounts receivables 55,000 95,000
inventory 50,000 40,000
prepaid expenses 35,000 20,000
current liabilities
accounts payable 100,000 80,000
other payable 40,000 30,000
salaries payable 40,000 30,000
tax payable 20,000 15,000

a. Determine the following ratios for the year 2022: i. Current ratio (10 marks) ii. Quick or acid-test ratio (4 marks) iii. Account receivable turnover ratio (3 marks) iv. Account receivable turnover in days (2 marks) v. Inventory turnover ratio (3 marks) vi. Inventory turnover ratio in days (2 marks)

b. Evaluate the company's financial performance by using the above findings of quick ratio, account receivable turnover ratio and inventory turnover ratio. (21 marks)

c. A higher inventory turnover ratio denotes a healthy business, whereas a lower ratio can indicate trouble. When inventory turnover is breakdown into business components, its significance as a critical business efficiency metric becomes clear. Describe THREE (3) importance to improve Inventory Turnover. (5 marks)

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