Answer Happy

Question 2 (Total 20 marks) Xavier Company's year-end balance sheet follow (in thousands). At December 31 Assets Cash. 55 50 Accounts receivable, net 10 20 Merchandise inventory.... 5 10 Prepaid expenses 1.5 2.1 Property, plant and equipment, net 60 55 Total assets 131.5 137.1 Liabilities and Equity Accounts payable…........... 24 26 Long-term notes payable secured by mortgages on property, plant and equipment 30 40 Share capital, $10 par value 20 20 Retained earnings 57.5 51.1 Total liabilities and equity... 131.5 137.1 Required: i. Express the balance sheet in common-size percents; round percents to two decimals. (10 marks) ii. Assuming annual sales doesn't change over the two-year period, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? Explain why. (3 marks) iii. Compute the current ratio for both years. Did the current ratio improve or worsen over the two-year period? What is the implication of this change? (7 marks) Current Prior Year Year