You have been provided with the following information about Yarker Ltd. (Yarker).

Required:

a. Calculate the accounts receivable, inventory, and accounts payable turnover ratios for 2013 through 2015.

b. Calculate the average collection period of accounts receivable, average number of days inventory on hand, and average payment period for accounts payable for 2013 through 2015.

c. Determine Yarker’s cash lag for 2013 through 2015.

d. Interpret the results you obtained in

(a) through (c). What do these results tell you about Yarker’s liquidity over the last three years? What are some possible explanations for the results?

e. Suppose you are a banker Yarker’s management approached about an expanded line of credit. How would the results you obtained in

(a) through

(c) affect your decision? Explain.

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2012 2013 2014 2015 Accounts receivable $ 1,125,000 $ 1,215,000 $ 1,275,750 $1,339,538 Inventory 2,500,000 2,600,000 2,730,000 2,593,500 Accounts payable 100,000 101,920 104,876 97,639 Revenue 10,000,000 10,500,000 10,290,000 9,775,500 Cost of sales 4,000,000 4,179,000 4,074,943 3,851,840