Question 3 The following selected information is taken from the financial statements of Riflen Company for its most recent year of operations: Inventory Accounts receivable Cash Prepaid expenses Accounts payable Taxes payable Wages payable Short-term loan payable $ 250,000 400,000 300,000 50,000 175,000 85,000 90,000 50,000 During the year. Riflen Company had net sales of $2.45m. The cost of goods sold was $1.3m. Assume beginning inventory = ending inventory. Required: Compute the following ratios: a) Current ratio b) Quick ratio c) Accounts receivable turnover d) Accounts receivable days le average collection period (ACP) Inventory turnover Inventory turnover days, ie average age of inventory (AAI) 9) Accounts payable turnover h) Accounts payable days, ie average payment period (APP) Solution a) Current assets = Current liabilities Current ratio = Current assets/Current liabilities b) Quick or acid-test ratio = (Cash + Receivables)/Current liabilities C) Accounts receivable turnover = Net sales/Ending receivables il 11 d) Accounts receivable days = 365/Accounts receivable turnover = e) Inventory turnover = Cost of goods sold/ Ending Inventory 1) Inventory days = 365/Inventory turnover ratio g) Accounts payable turnover = Cost of goods sold/ Accounts payable h) Accounts payable days 365/Accounts payable turnover undinn