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You are a Supplier: A retailer requests to purchase supplies on credit from your company. You...

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Accounting

You are a Supplier: A retailer requests to purchase supplies oncredit from your company. You have no prior experience with thisretailer. The retailer’s current ratio is 2.1, its acid-test ratiois 0.5, and inventory makes up most of its current assets. Do youextend credit?

You are the Financial Officer: Your company has a 36% grossmargin ratio and a 17% net profit margin ratio. Industry averagesare 44% for gross margin and 16% for net profit margin. Do thesecomparative results concern you?

Answer & Explanation Solved by verified expert
4.0 Ratings (737 Votes)
Case I Supplier Point of View The Retailer has a strong current ratio of 21 however its Quick ratio is 050 which in itself shows that the Current Asset is mostly made of Inventory As    See Answer
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