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Accounting Homework 9

Accounting Homework 9 - Payable Turnover Ratio for Urban...

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Aren Alvarez and Emily Ard Homework #9 4/5/11 Accounting TS-1 1. Compute the quick ratio for each company for the current year. Quick Ratio for American Eagle Quick Assets/Current Liabilites= 630,431/401,763=1.57 The quick ratio is 1.57. Quick Ratio for Urban Outfitters Quick Assets/Current Liabilites= 454,704/141,150=3.22 The quick ratio is 3.22. 2. Compare the most recent quick ratio for each company to the industry average from the Industry Ratio Report. Based solely on the quick ratio, are these companies more or less liquid than the average company in their industry? American Eagle: 1.57 Urban Outfitters: 3.22 Both averages are above the current average, showing that they are both more liquid.
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3. Compute the payable turnover ratio for each company for the most recent reporting year. Payable Turnover Ratio for American Eagle Cost of goods sold in the current year/ average accounts payable=payable turnover ratio 1,814,765/[(152,068 + 157, 928)/2]= 11.71 Payable Turnover Ratio for American Eagle: 11.71
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Unformatted text preview: Payable Turnover Ratio for Urban Outfitters Cost of goods sold in the current year/ average accounts payable=payable turnover ratio 1,121,140/[(62,955+74,020)/2]=16.37 Payable Turnover Ratio for Urban Outfitters: 16.37 4. Compare the latest year payable turnover ratio for each company to the industry average from the Industry Ratio Report. Are these companies doing better or worse than the average company in their industry at paying trade creditors? Both companies are more efficient, because a higher account payable ratio suggests that a company is paying its suppliers in a timely manner. 5. Using this information and any other data from the annual report or other sources, write a brief assessment of the liquidity for the two companies. Both companies seem to have liquidity higher than one. Both also each have liquidity higher than the average liquidity as well. This liquidity allows the companies to pay trade creditors, making each more efficient....
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