Shown below are selected financial data for AB and XY Limited at the end of the current year:

AB Ltd

XY Ltd

Net credit sales

$675,000

$560,000

Cost of goods sold

504,000

480,000

Cash

51,000

20,000

Accounts receivable

75,000

70,000

Inventory

84,000

160,000

Current liabilities

105,000

100,000

Required:

a) For each of the two companies, compute the following:

1. Working capital

2. Current ratio

3. Quick ratio

4. Inventory turnover ratio and average number of days required to turn over inventory

5. Accounts receivable ratio and average accounts receivable collection period.

b) From the viewpoint of a short-term creditor, comment on the quality of each company's

working capital. To which company would you prefer to sell $20,000 in goods on a 30-day

open account?