Use the following information for questions .
Selected financial ratios for Front Room Decorating Incorporated are as follows: $\begin{array}{llll}
&2013&2012&2011\
\text { Current ratio } & 2.50: 1 & 2.0: 1 & 1.75: 1 \
\text { Accounts receivable turnover } & 7 \text { times } & 12 \text { times } & 18 \text { times } \
\text { Inventory turnover } & 9 \text { times } & 9.1 \text { times } & 8.9 \text { times }
\end{array}$ 98 Based upon an analysis of the above information, which of the following statements most accurately describes Front Room's financial results for 2013?
a. The company is selling more inventory.
b. The company is taking longer to collect its accounts receivable.
c. The company's current ratio deteriorated.
d. The company's liquidity improved.
-When assessing the above ratios on an overall basis, most analysts would conclude that the company's liquidity
A) improved.
B) declined.
C) remained unchanged.
D) cannot be determined from the information provided.

Question

Quizplus · Accepted Answer

The company's accounts receivable turnover decreased from 18 times in 2011 to 7 times in 2013, indicating it is taking longer to collect its receivables, which can negatively impact liquidity. Although the current ratio has increased, suggesting improved liquidity, the significant decrease in accounts receivable turnover is a negative indicator that could outweigh the positive impact of the higher current ratio, leading to a conclusion that liquidity may have declined.

Use the Following Information for Questions 98 Based Upon an Analysis of the Above Information, Which