Exercise 9-12 Franklin Ltd., a gift store, reported the following amounts in its 2017 financial stat
Exercise 9-12 Franklin Ltd., a gift store, reported the following amounts in its 2017 financial statements. The 2016 figures luating ratio data given for comparison are 1.2017,0.72 2017 2016 Current assets: CO $ 12,000 Cash $26,000 Short-term investments 46,000 22,000 009 Accounts receivable $120,000 $148,000 Less: Allow. for uncollectibles 20,000 100,000 18,000 130,000 384,000 378,000 Inventory Prepaid insurance 4,000 4,000 $546,000 $ 218,000 560,000 $ 224,000 Total current assets Total current liabilities $1,460,000 $1,464,000 Net sales Required 1. Determine whether Franklin Ltd.'s acid-test ratio improved 2016 to 2017. How does Franklin Ltd.'s acid-test ratio compare with the industry average of 0.902 2. Compare the days' sales in receivables measure for 2017 with the company's credit terms of net 30. What action, if any, should Franklin Ltd. take? 3. Indicate the most likely effect of the following changes in credit policy in receivables (+for increase, for decrease, and NE for no effect): a. Granted credit to people with poor credit history. b. Increased collection techniques or methods. c. Granted credit with discounts for early payment. or deteriorated from on the days' sales