Business, 28.06.2020 06:01 pstat

Fact Pattern: Tosh Enterprises reported the following account information: Accounts receivable $400,000 Accounts payable 260,000 Bonds payable, due in 10 years 600,000 Cash 200,000 Interest payable, due in 3 months 20,000 Inventory $800,000 Land 500,000 Short-term prepaid expense 80,000 '; What will happen to the ratios below if Tosh Enterprises uses cash to pay 25% of the accounts payable

Answers: 1

Show answers

Answers

Answer from: layja9

Current ratio will increase

Quick ratio will increase

Explanation:

Note: The complete question is what will happen to Current ratio and the Quick ratio if Tosh Enterprises uses cash to pay 25% of the accounts payable?

These can be determined as follows:

a. Initial values

Current assets = Accounts receivable + Cash + Inventory + Short-term prepaid expense = $400,000 + $200,000 + $800,000 + 80,000 = $1,480,000

Current liabilities = Accounts payable + Interest payable, due in 3 months = $260,000 + $20,000 = $280,000

Initial current ratio = Current assets / Current liabilities = $1,480,000 / $280,000 = 5.29

Initial Quick ratio = (Current assets - Inventory) / Current liabilities = ($1,480,000 - $800,000) / $280,000 = 2.43

b. New values

20% of Accounts payable = 260,000 * 20% = $52,000

If Tosh Enterprises uses cash to pay 25% of the accounts payable, both the current assets and liabilities will fall by $52,000 by subtracting it from each of them to obtain new values as follows:

New current assets = $1,480,000 - $52,000 = $1,428,000

New current liabilities = $280,000 - $52,000 = $228,000

New current ratio = New current assets / New current liabilities = $1,428,000 / $228,000 = 6.26

New quick ratio = (New current assets - Inventory) / New current liabilities = ($1,428,000 - $800,000) / $228,000 = 2.75

c. Summary and Conclusion

Since the initial current ratio of 5.29 is less than the new current ratio of 6.26, this shows that current ratio will increase if Tosh Enterprises uses cash to pay 25% of the accounts payable.

Also, since initial quick ratio of 2.43 is less than the new qucik ratio of 2.75, this also shows that quick ratio will increase if Tosh Enterprises uses cash to pay 25% of the accounts payable.

Therefore we have:

Current ratio will increase

Quick ratio will increase

Answer from: Quest

When odysseus hurts him.the cyclops is drunk and blubbering. he promises to eat odysseus last of all the men as an expression of gratitude for the wine. odysseusand his men tie themselves to the undersides of the cyclops' sheep/rams so they can escape when the cyclops lets the animals out to graze.: )

Answer from: Quest

Kyana is high in the "s" intelligence according to myers-biggs

Another question on Business

Business, 22.06.2019 01:00

Awidower devised his fee simple interest in his residence as follows: “to my daughter for life, then to my oldest grandchild who survives her.” at the time of the widower’s death, he was survived by his only two children, a son and a daughter, and by one grandchild, his daughter’s son. a short time later, the daughter together with her son entered into a contract to sell the residence in fee simple to a buyer. the applicable jurisdiction continues to follow the common law rule against perpetuities, but has abrogated the rule in shelley’s case. at the closing, the buyer refused to purchase the residence. can the sellers compel the buyer to do so?

Answers: 2

Answer

Business, 22.06.2019 09:20

Which statement best explains the relationship between points a and b? a. consumption reaches its highest point, and then supply begins to fall. b. inflation reaches its highest point, and then the economy begins to expand. c. production reaches its highest point, and then the economy begins to contract. d. unemployment reaches its highest point, and then inflation begins to decrease.

Answers: 2

Answer

Business, 22.06.2019 16:40

Match the situations that will develop one's personality and those that won't peter is surrounded by friends who are always encouraging him jonathan always watches television when he wants to take a break from his books libby sets small targets for herself and strives to achieve them. the smiths indulge in an animated discussion on varied topics every evening after dinner. brook loves junk food and exercises once in a while. develops your personality develops doesn't develop your personality

Answers: 2

Answer

Business, 22.06.2019 16:50

Slow ride corp. is evaluating a project with the following cash flows: year cash flow 0 –$12,000 1 5,800 2 6,500 3 6,200 4 5,100 5 –4,300 the company uses a 11 percent discount rate and an 8 percent reinvestment rate on all of its projects. calculate the mirr of the project using all three methods using these interest rates.

Answers: 2

Answer

You know the right answer?

Fact Pattern: Tosh Enterprises reported the following account information: Accounts receivable $400,...

Questions