The following ratios were calculated for two competitors operating in the same industry.

The standard sales terms in the industry is 1/7, n/30.

The following ratios were calculated for two competitors operating in the same industry.

The standard sales terms in the industry is 1/7, n/30.

	East Ltd		West Ltd
	2019	2018	2019	2018
Average collection period	22.5 days	29.5 days	42 days	35 days
Debt to total assets ratio	0.72: 1	0.71:1	0.34: 1	0.35: 1
Times interest earned	5.45 times	7.69 times	16.55 times	9.69 times

Required:

a) From the calculated ratios above and given information, which company has better management of receivables, and why? (2 marks)

b) From the calculated ratios above, which company has better chance of surviving over a long period of time, and why? (2 marks)

Required:

a) From the calculated ratios above and given information, which company has better management of receivables, and why? (2 marks)

b) From the calculated ratios above, which company has better chance of surviving over a long period of time, and why? (2 marks)