It is certainly not a perfect barometer‚ but good enough. Watch for big decreases in this number over time. Make sure the accounts listed in current assets are collectible. Quick Ratio Formula: (Cash – Accounts Receivable) / Total Current Liabilities This is another good indicator of liquidity although by itself‚ it is not a perfect one. If there are receivable accounts included in the numerator‚ they should be collectible. Look at the length of time the company has to pay the amount listed
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Item #1 Invoices for goods sold are posted to incorrect customer accounts. Fraud Item #2 Invoices are sent for shipped goods and are recorded in the sales journal‚ but are not posted to any customer account. Following the scientific method‚ answer the following questions below: a. Do background research in relationship to the issue to get a more in-depth understanding of the situation. What questions would you ask of management to determine how the fraud is occurring based on the specific
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result in permanent current assets and some seasonal current assets being financed using long-term securities. a. True b. False 2. For a zero-growth firm‚ it is possible to increase the percentage of sales that are made on credit and still keep accounts receivable at their current level‚ provided the firm can shorten the length of its collection period sufficiently. a. True b. False 3. Which of the following statements is CORRECT? a. Trade credit is provided only to relatively large‚ strong firms. b
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Ex. 6.2 B. Ex. 6.3 B. Ex. 6.4 B. Ex. 6.5 B. Ex. 6.6 B. Ex. 6.7 B. Ex. 6.8 B. Ex. 6.9 B. Ex. 6.10 B. Ex. 6.11 Exercises 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 Topic Computation of gross profit Accounts receivable subsidiary ledger Perpetual inventory system computation of income Periodic inventory system inventory balance during year Periodic inventory system determine cost of goods sold Periodic inventory system working backwards through the COGS
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investments and projects that business management takes to make capital budgeting decisions and improve income and rate of return. This paper discusses the findings of the simulation completed for Sunflower Nutraceuticals‚ which was completed as a part of the Harvard Business Simulation. The paper examines three scenarios where managerial decisions were made to pursue risk opportunities‚ reduce liability‚ increase sales‚ and reduce the time of outstanding account receivables in the Cash Cycle. Company Details
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production. Also‚ the auditors should compare client data with prior period data***. For example‚ days sales in receivables increased from 48.4 days (2004) to 56.3 days (2005). Though sales didn’t increase a lot ‚but days sales in receivables increased a lot. There may be customers who are not paying due to defective products they purchased. The auditors need to look at accounts receivable aging report and returns that are not processed timely by reviewing returns. Plus‚ finished goods‚ copper rod
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flow problems by mid-year 14 is the increases in accounts receivable compared to the increases in sales. From year 11 to year 12 accounts receivables went up by 79.53 percent‚ 82.21 percent from year 12 to year 13 and from year 13 to year 14‚ they went up by 34.28 percent. Even though this isn’t the main reason why FBN is facing serious cash flow problems‚ it is definitely something that they should take care of. Those increases in accounts receivables could be justified if sales had increased in a
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Consulting Firm Inc. has been hired to review Auto Parts Inc. company functions. The consulting firm reviewed the cash‚ sales‚ accounts receivable‚ inventory and production functions. Based on this review‚ the consulting firm has prepared a proposal of internal controls for each function of the company. This proposal will give a background of each function and a list of the proposed internal controls. Cash Auto Parts Inc. manufactures and sells auto parts to car dealerships as well as the general
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Company Recommendation We recommend that the bank extend the line of credit loan of $75‚000 at 8.5% to CCWC and institute the other aspects of Mr. Robb’s suggestions. A mandatory guarantee by the principals‚ annual account cleanup and using CCWC’s account receivable as collateral would all reduce the risk to the bank. Even if CCWC goes bankrupt‚ it does not have any other loans on its books and a current ratio at about 1.2. (Exhibit 1) Since only a small percentage of its inventory is work-in-progress
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