Question Details

Comment briefly on the liquidity of each of these two companies




1.	Presented below are selected data from the financial statements of eMonstore.com for 2014, 2013, and 2012.

	2014	2013	2012
Total assets	$650,000	$821,000	$800,000
Net credit sales	$800,000	$650,000	$720,000
Accounts receivable	$85,000	$79,000	$74,000

A.	Calculate eMonstore.com's accounts receivable turnover ratio for 2014 and 2013.
B.	Calculate the number of days the average balance of receivables is outstanding before being converted into cash (turnover in days) for 2014 and 2013.
C.	What problems do you see with the company's credit policy if the terms are net 30 days? Explain.



2.	The following information is summarized from the balance sheets of Kress Inc. and Ross Corp. at December 31, 2013. Neither company has inventory.

	Kress	 Ross
Current Assets:		
   Cash and cash equivalents	$   340,800	$100,200
   Short-term investments	12,000	7,600
   Accounts receivable, net	377,000	42,000
   Notes receivable, net	36,300	18,000
   Prepaid assets	     207,400	    40,000
      Total current assets	$   973,500	$207,800
		
Current liabilities	$   860,900	$150,000
Other liabilities	5,000,400	300,500
Stockholders' equity	2,400,300	800,700

1.	Using the information provided above, compute the following for each company at December 31, 2013:
	A.	Current Ratio
	B.	Quick Ratio
	
2.	Comment briefly on the liquidity of each of these two companies. Which company appears to be the most liquid?




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