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Prepare a brief report commenting on outtel liquidity

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Reference no: EM132762929

Question: The income statement of OutTel Ltd for the year ending 30 June is detailed below: Credit Sales

Year 2020 : $850 000

Year 2019: $695 000

Cost of goods sold

Year 2020 : 650 000

Year 2019: 480 000

Gross profit

Year 2020 : 200 000

Year 2019: 215 000

Operating expenses

Year 2020 : 120 000

Year 2019: 132 000

Profit

Year 2020: 80 000

Year 2019: 83 000

The following amounts have been extracted from the company's balance sheet as at 30 June:

Accounts / Trade receivable

Year 2020 : $115 000

Year 2019: $135 000

Year 2018: $165 000

Prepaid expenses

Year 2020 : 10 000

Year 2019: 15 000

Year 2018: 22 000

Cash

Year 2020 : 15 000

Year 2019: 20 000

Year 2018: 18 000

Inventory

Year 2020 :65 000

Year 2019: 85 000

Year 2018: 145 000

Bank overdraft

Year 2020 :13 000

Year 2019: 4 000

Year 2018: 7 000

Accounts payable

Year 2020: 80 000

Year 2019: 98 000

Year 2018: 83 000

Accrued expenses

Year 2020 : 6 000

Year 2019: 6 000

Year 2018: 6 000

Required: a) Calculate the following ratios for 2020 and 2019:

i. current ratio

ii. quick ratio

iii. days inventory

iv. days debtors

b) Prepare a brief report commenting on OutTel's liquidity and efficiency.

Reference no: EM132762929

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