TheImex Computer Company has completed its fiscal year on December 31. 2010. The auditor Sandra Blake, has approached the CFO, Travis Williams, regarding the year-end receivables and inventory levels of Imex.
The following conversation takes place:
Sandra:We are beginning our audit of Imex and have prepared ratio analysis to determine if there have been significant changes in financial position. This helps us guide the audit process. This analysis indicates that the inventory turnover has decreased from 5 to 2.8, while the accounts receivable turnover has decreased from 12 to 8. I was wondering if you could explain this change in operations.
Travis:There is little need for concern. The inventory represents computers that were unable to sell during the holiday buying season. We are...
Excerpt from file: TheImexComputerCompanyhascompleteditsfiscalyearonDecember31.2010.The auditorSandraBlake,hasapproachedtheCFO,TravisWilliams,regardingtheyear endreceivablesandinventorylevelsofImex. Thefollowingconversationtakesplace: Sandra:WearebeginningourauditofImexandhavepreparedratioanalysisto
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