Please share an example of the "acid test ratio" and explain whether or not you think...

Please share an example of the "acid test ratio" and explain whether or not you think this ratio would be helpful in evaluating Loon Company's cash situation.

Jill Land, president of Loon. Co., is happy to report to the company's stockholders that the company increased its cash position by 20% from last year. Its average collection period decreased by 12 days. Jill knows some customers are unhappy about the new credit terms but believes that you cannot please everyone; that's part of business. Do you think Loon Co. is on the right track? One shareholder is quite upset to learn that the company is holding so much cash. Do you agree with the company's belief that increasing the cash position by 20% is sound? You make the call. Be sure to justify your answer!

just answer the first question above you do not need to answer the rest

Solutions

Expert Solution

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

What is its acid-test (quick) ratio?

A company has cash of $100 million, accounts receivable of $600 million, current assets of $1.2 billion, accounts payable of $400 million, and current liabilities of $900 million. What is its acid-test (quick) ratio?

1. Compute the acid-test ratio and explain its use to assess liquidity. 2. Compute the gross margin ratio...

1. Compute the acid-test ratio and explain its use to assess liquidity. 2. Compute the gross margin ratio and explain its use to assess profitability. Google one of your favorite companies and use their annual report to complete one of the following tests

Think of an example to explain the law of diminishing returns. Please explain how this relates...

Think of an example to explain the law of diminishing returns. Please explain how this relates to a specific industry.

Assuming a current ratio of 1.4 and an acid-test ratio of 0.78, how will the cash...

Assuming a current ratio of 1.4 and an acid-test ratio of 0.78, how will the cash payment of Prepaided Insurance affect each ratio? Increase the current ratio and increase the acid-test ratio No change to the current ratio and decrease the acid-test ratio Decrease the current ratio and decrease the acid-test ratio Decrease the current ratio and increase the acid-test ratio None of above

When calculating an Acid Test Ratio to evaluate the liquidity of each company, if you were...

When calculating an Acid Test Ratio to evaluate the liquidity of each company, if you were to see "Available-for-sale investment securities" on the Balance Sheet under assets. Would you classify that as a Marketable Security? / would that be included when doing an Acid Test Ratio.

Find the Acid-test ratio, Cash ratio, and Accruals ratio for the years 2015-2017 first column is...

Find the Acid-test ratio, Cash ratio, and Accruals ratio for the years 2015-2017 first column is 2017 then 2016 then 2015 Cash and due from banks 2,012 1,853 1,382 Interest-bearing deposits in other banks 1,899 3,583 3,932 Federal funds sold and securities purchased under agreements to resell 70 15 - Debt securities held to maturity 1,658 1,362 1,946 Trading account securities - 124 143 Debt securities available for sale 23,403 23,781 22,710 Loans held for sale 348 718 448 Loans, net...

Assume that the current ratio for Arch Company is 3.5, its acid-test ratio is 1.5, and...

Assume that the current ratio for Arch Company is 3.5, its acid-test ratio is 1.5, and its working capital is $330,000. Answer each of the following questions independently, always referring to the original information. Required: a. How much does the firm have in current liabilities? (Do not round intermediate calculations.) b. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory?...

Assume that the current ratio for Arch Company is 3.5, its acid-test ratio is 2.0, and...

Assume that the current ratio for Arch Company is 3.5, its acid-test ratio is 2.0, and its working capital is $370,000. Answer each of the following questions independently, always referring to the original information. Required: How much does the firm have in current liabilities? (Do not round intermediate calculations.) If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory? (Do not...

Assume that the current ratio for Arch Company is 3.0, its acid-test ratio is 1.5, and...

Assume that the current ratio for Arch Company is 3.0, its acid-test ratio is 1.5, and its working capital is $310,000. Answer each of the following questions independently, always referring to the original information. Required: a. How much does the firm have in current liabilities? b. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory? c. If the firm collects...

(a) The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If...

(a) The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $544,000, what is the amount of current liabilities? (b) A company had an average inventory last year of $200,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year? (c)...

Subjects