7.5 Calculate the quick ratio and accounts receivable turnover
1) Another name for the quick ratio is the acid-test ratio.
2) The formula for the quick ratio is quick assets divided by non-current assets.
3) Accounts receivable turnover measures the ability to collect cash from a company's credit customers.
4) The account receivable turnover is computed by taking the average net accounts receivable and dividing by the net credit sales.
5) Sierra Company has cash of $33,000; net accounts receivable of $41,000; short-term investments of $15,000; and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long-term liabilities. The quick ratio for Sierra Company is:
A) 1.78.
B) 2.97.
C) 3.30.
D) 3.80.
E) 2.99.
6) Meranda Corporation reported cash sales of $235,000; net credit sales of $515,000; beginning net accounts receivable of $212,000; and ending net accounts receivable of $224,000. Meranda's accounts receivable turnover is:
A) 2.30.
B) 2.36.
C) 2.43.
D) 3.44.
E) 2.63.
7) A company with a quick ratio of 1.23 means that the company:
A) has $1.00 in quick assets for every $1.23 in current liabilities.
B) has $1.23 in quick assets for every $1.00 in current liabilities.
C) could not pay off all of its current liabilities using quick assets.
D) would have to use inventory to help pay off its current liabilities.
E) has $1.23 in current assets for every $1.00 in current liabilities.
8) Walmart operates on a quick ratio of less than 0.20 because it collects cash:
A) quickly and has a large amount of receivables.
B) slowly and has almost no receivables.
C) slowly and has a large amount of receivables.
D) quickly and has almost no receivables.
E) quickly and has only long-term receivables.
9) If a company has 90-day credit terms, what would you expect its accounts receivable turnover to be?
10) A company with an accounts receivable turnover of 11.78 would be collecting its receivables about __________.