Use the Following Information That Was Obtained from the 2016

question 40

Essay

Use the following information that was obtained from the 2016 and 2015 financial statements of Lake Company, River Corporation, and Ocean Company to answer the questions that follow.
REQUIRED: Compare the three companies and answer the following:
A Compute the accounts receivable turnover ratio for each company for 2016.
B Which company appears to have the best liquidity position based solely on the accounts receivable turnover? Explain.

---

Definitions:

Variable Expenses

Costs that change in proportion to the activity or volume of a business operation.

Contribution Margin

The difference between sales revenue and variable costs; used to cover fixed costs and generate profit.

Break-Even Point

The sales level at which the company does not make a profit or incur a loss, denoting a balance between revenue and costs.

Variable Manufacturing Costs

These costs vary directly with the level of production output and include expenses such as raw materials, direct labor, and certain overheads.