Practice Question

Gary feels concerned about the health of his company's cash. He does not have much in his bank account, and he wonders if the money owed to him will cover what he owes to other businesses. What would you recommend?

He should look at the accounts receivable and payable on the balance sheet to see if the receivable amount is higher than the payable.
He should review his latest bank statement to ascertain the number of his accounts receivable.
He should cut down on buying inventory immediately.