(Calculating liquidity ratios, LO 2) Use the information provided about Fairplay Inc. in Exercise E13-3 to respond to the following:

a. Calculate the following for 2004 and 2005:

i. current ratio ii. quick ratio iil. accounts receivable turnover ratio iv. average collection period of accounts receivable v. inventory turnover ratio vi. average number of days inventory on hand vii. accounts payable turnover ratio vill. average payment period for accounts payable ix. cash lag

b. Assume the role of an important new supplier to Fairplay. Use the amounts calculated in part

(a) and prepare a report assessing whether Fairplay should be granted credit terms for purchases from your company. Explain the conclusions you make.