In: Accounting
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