【正文】 nothing on the uncertain values of merchandise inventory. A less than 1:1 ratio may be adequate if receivables are quickly collected and if inventory is readily and quickly sold, that is, if its turnover is rapid andif the risks of changes in price are small. The liquidity of current assets varies with liquidity of receivables. This may be ascertained by dividing annual sales by average receivables or by receivables at the close of the year unless at that date receivables do not represent the normal amount of credit extended to customers. Terms of sale must be considered in judging the turnover of receivables. For example, if sales for the year are $1,200,000 and average receivables amount to $100,000, the turnover of receivables is $1,200,000/$100,000=12. Now, if credit terms to customers are in thirty days we can see that receivables are paid promptly. Consideration should also be given market conditions and the stage of the business cycle. Terms of credit are usually longer in farming sections than in industrial centers. Collections are good in prosperous times but slow in periods of crisis and liquidation. Trends in the liquidity of receivables will also be reflected in the ratio of accounts receivable to notes receivable, in cases where goods are typically sold on open account. A decline in this ratio may indicate a lowering of credit standards since notes receivable are usually given to close overdue open accounts. If possible, a schedule of receivables should be obtained showing those not due, due, and past due thirty, sixty, and niy days. Such a, schedule is of value in showing the efficiency of credits and collections and in explaining the trend in turnover of receivables. The more rapid the turnover of receivables the smaller the risk of loss from bad debts。s reputation is beyond reproach. Is workingcapital situation favorable ?If the parative statements to be analyzed are reasonably adequate for the purpose, the next step is to analyze the concern39。s cash position may be tested by dividing the item of cash by the total of current liability items and using the quotient to express the result of the test. Each ratio may be expressed in two ways, for example, the ratio of sales to fixed assets may be expressed as the ratio of fixed assets to sales. We shall express each ratio in such a way that increases from period to period will be favorable and decreases unfavorable to financial condition. We shall use the following financial ratios in analyzing parative financial statements: I. Workingcapital ratios 1. The ratio of current assets to current liabilities 2. The ratio of cash to total current liabilities 3. The ratio of cash, salable securities, notes and accounts receivable to total current liabilities 4. The ratio of sales to receivables, ., the turnover of receivables 5. The ratio of cost of goods sold to merchandise inventory, ., the turnover of inventory 6. The ratio of accounts receivable to notes receivable 7. The ratio of receivables to inventory 8. The ratio of working capital to inventory 9. The ratio of notes payable to accounts payable IO. The ratio of inventory to accounts payable II. Fixed and intangible capital ratios 1. The ratio of sales to fixed assets, ., the turnover of fixed capital 2. The ratio of sales to intangible assets, ., the turnover of intangibles 3. The ratio of annual depreciation and obsolescence charges to the assets against which depreciation is written off 4. The ratio of worth to fixed assets III. Capitalization ratios 1. The ratio of worth to d