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Unformatted text preview: = $405,000/[($35,000 + $42,000)/2] = $405,000/$38,500 = 10.52 times j.) Number of Days In Sales Inventory = 360 days/10.52 times = 34 days k.) Number of days in cash operating cycle = 34 days + 22 days = 56 days 2.) On Next Page 2.) The current ratio is slightly less than 1 to 1, and the significantly smaller quick ratio may signal a problem with excess inventory. Whether or not the quick ratio is indicative of a liquidity problem could be determined more accurately by comparing this ratio with those of prior years, as well as with an industry average. To fully evaluate the companys financial health, it would be necessary to know more about its plans for the long run....
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- Fall '08