Reference no: EM132621995

Platinum Corporation belongs to the rubber tire trading industry. Its most recent balance sheet and income statement appear below:

Statement of Financial Position
December 31, Year 2 and Year 1
(in thousands of dollars)
	Year 2	Year 1
Assets
Current assets:
Cash.	$30	$110
Accounts receivable	210	260
Inventory	190	170
Prepaid expenses	70	70
Total current assets	500	610
Plant and equipment, net	810	740
Total assets	$1,310	$1,350
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$140	$150
Accrued liabilities	30	30
Notes payable, short term	40	40
Total current liabilities	210	220
Bonds payable	190	240
Total liabilities	400	460
Stockholders' equity:
Preferred stock, $100 par value, 5%	100	100
Common stock, $2 par value	400	400
Additional paid-in capital-common stock	130	130
Retained earnings	280	260
Total stockholders' equity	910	890
Total liabilities & stockholders' equity	$1,310	$1,350

Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account)	$1,260
Cost of goods sold	770
Gross margin.	490
Selling and administrative expense	400
Net operating income	90
Interest expense	26
Net income before taxes	64
Income taxes (30%)	19
Net income	$45

Required:

Question A. Compute the following for Year 2:

a. Working capital.

b. Current ratio.

c. Acid-test ratio.

d. Accounts receivable turnover.

e. Average collection period.

f. Inventory turnover.

g. Average sale period

 

Question B. What can you say about the company's short-term liquidity?

Question C. If the industry average in terms of collection period is 45 days, and inventory turnover is 6 times, how is the company performing compared to the industry?