The Following Information Is Available for Flanders and Its Two

question 181

Essay

The following information is available for Flanders and its two main competitors in the industry,Sanders and Anders:
$$\begin{array} { | l | l | l | l | } \hline & \text { Flanders } & \text { Sanders } & \text { Anders } \\\hline \text { Cash } & \$ 9,800 & \$ 10,500 & \$ 26,500 \\\hline \text { Short-term investments } & 6,400 & 8,200 & 12,500 \\\hline \text { Accounts receivable } & 12,500 & 8,500 & 14,350 \\\hline \text { Merchandise inventory } & 30,150 & 40,000 & 40,150 \\\hline \text { Prepaid expense } & 900 & 6,750 & 2,450 \\\hline \text { Accounts payable } & 19,400 & 13,750 & 26,800 \\\hline \text { Salaries payable } & 1,200 & 3,500 & 6,250 \\\hline \text { Other current payables } & 600 & 1,200 & 2,150 \\\hline\end{array}$$
The industry standard for the current ratio is 1.8 and the industry standard for the acid-test ratio is 1.
Required:
1.Calculate the current ratio and acid-test ratio for each firm.
2.Rank the firms in decreasing order of liquidity.
3.Comment on Flanders' relative liquidity position.

Distinguish between direct and indirect (inverse) correlations and their implications.

Understand the basics and limitations of correlation coefficients in describing data.

Identify appropriate situations to use specific correlation coefficients, like the phi coefficient.

Comprehend the concept of partial correlations and the removal of mediating variable effects.

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Definitions:

Compensatory Stock Option

An employee benefit option that gives the right to purchase company stock at a discount.

Compensation Expense

The total amount of cash and non-cash payments that businesses must make to employees, including salaries, bonuses, and benefits.

Paid-in Capital

The total amount of cash and other assets received from shareholders in exchange for stock, including amounts above the nominal value (or par value) of the shares.

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.