1. Firm A has net income of $3 million and Firm B net income of $6 million, both in 2017. Discuss at least three major reasons why Firm A might actually have performed better than Firm B in 2017, despite having the lower net income.
2. ”A firm’s current ratio has fallen from 2016 to 2017. This means that it’s current assets must have fallen over the same period.” Explain in detail why this statement is not necessarily true.
3. A firm’s average collection period is 40 days. What other information would you need in order to evaluate whether or not this represents good performance in terms of receivables management by this firm?