Accounts Receivable, Assets, Liabilities and Earnings
Not what you're looking for?
22. The following calculations have been made for Coos Company:
Growth Rate
Net sales 10.5%
Total accounts receivable 21.3%
Allowance for doubtful accounts 2.6%
Current Year Prior Year
Allowance for doubtful accounts as a
percentage of total accounts receivable 3.8% 5.4%
Analyze the accounts receivable and allowance for doubtful accounts
24. Use the following common size balance sheet to answer the questions below:
a) Explain what has happened to current assets and long-term assets.
b) Explain the changes in the liabilities section of the balance sheet.
c) What has occurred to Retained Earnings at year-end? What is the company's financial position?
BALANCE SHEET
2011 2010
Current assets:
Cash 3% 5%
Accounts receivable 20 18
Inventory 35 30
Total current assets 58% 53%
Property, plant and equipment 30 40
Other assets 12 7
Total assets 100% 100%
Current liabilities:
Accounts payable 25% 20%
Short-term debt 38 33
Total current liabilities 63% 53%
Long-term debt 22 17
Total liabilities 85% 70%
Common stock and paid in capital 14 20
Retained earnings 1 10
Total stockholders' equity 15% 30%
Total liabilities and stockholders' equity 100% 100%
Purchase this Solution
Solution Summary
Your discussion is 525 words and gives three potential theories for the AR shifts and discusses what may lead to the changes in common sized percent. The financial position is unfavorable and the reasons are given.
Solution Preview
22. This requires you to know that AR balances should move in similar ways as sales. If sales double, you would expect AR to double too. Here sales went up 10.5% but AR did not move in a similar way. It went up almost twice that amount....21.3% (vs. 10.5%). Why would AR grow? Because you are not collecting the sales. That is a problem. What kind of problem? Well, they do not give you much information so you can only speculate.
Here are some potential theories:
Theory about lower credit clients: Just added new customers at year end who have marginal credit and are not paying.
The theory about surge at year end: You just booked a very large sale at year end and it is not yet due.
Theory about change in sales terms: The recession just hit and you agreed to allow ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Introduction to Finance
This quiz test introductory finance topics.