However, the company’s sales, cash and equivalents, DSO,and fixed assets turnover ratio remained constant. What balance sheet accounts must havechanged to produce the indicated changes?

4-3 Over the past year, M.D. Ryngaert & Co. had an increase in its current ratio and a decline inits total assets turnover ratio. However, the company’s sales, cash and equivalents, DSO,and fixed assets turnover ratio remained constant. What balance sheet accounts must havechanged to produce the indicated changes?

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Expert Solution

Current Ratio = Current Assets/Current Liabilities

Total Assets Turnover Ratio = Sales/Total Assets

Fixed Assets turnover ratio = Sales/Fixed Assets

Sales and fixed asset turnover ratio has remained constant, that means fixed assets also remained constant during the period

Increase in current ratio and decline in total total assets turnover ratio has happened due to increase in current assets

Cash and cash equivalents and debtors remained constant during the period. So the changes must have happened in inventory, prepaid expenses or other current assets

The balance sheet items that must have changed are

Inventories prepaid expenses or any current assets other than cash and debtors

jeff jeffy answered 2 years ago

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