The financial statements of Alliance News, Inc., include the following items:
Balance sheet: Cash............................................ Short-term investments................ Net receivables ............................Inventory.....................................Prepaid expenses.......................... Total current assets......................Accounts payable......................... Total current liabilities.................Income statement: Net credit sales............................Cost of goods sold.......................2012$ 39,000 12,000 73,000 91,000 11,000 226,000 70,000 133,000$491,000 277,0002011$ 45,000 23,000 76,00077,000 5,000 226,000 55,000 94,000$504,000282,000201060,000 62,00050,000
Compute the following ratios for 2012 and 2011: a. Current ratio b. Quick (acid test) ratio c. Inventory turnover and days’ inventory outstanding (DIO) d. Accounts receivable turnover e. Days’ sales in average receivables or days’ sales outstanding (DSO) f. Accounts payable turnover and days’ payable outstanding (DPO) g. Cash conversion cycle (in days). (When computing days, round your answer to the nearest whole number.) Evaluate the company’s liquidity and current debt-paying ability for 2012. Has it improved or deteriorated from 2011? As a manager of this company, what would you try to improve next year?