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Question $4$

Barneys Oldyork Corp, a clothing retailer, reported the following quarterly financial

information to Fidelity Fiduciary Bank in compliance with the terms of a bank loan. One of the

loan covenants stipulates that Barneys Oldyork Corp must maintain a maximum DSO of $45$

days, calculated using the quarter$-$end balance in accounts receivable.

Answer the following questions in the provided textbox:

A$.$ What is the DSO for each quarter? Hint: Be mindful of the number of days in each

quarter, and the current year is not a leap year.

B$.$ Is Barney's Oldyork Corp in compliance with the loan covenant? Explain your answer.

C$.$ What is a reasonable interpretation of the pattern you observe in the DSO?

D$.$ Based on the proportion of Allowance for doubtful accounts to Gross accounts receivable,

is the pattern favorable or unfavorable? Explain your answer.

E$.$ Recalculate the DSO for each quarter using the Gross accounts receivable. What are they

and what do you conclude from these calculations?

F$.$ If you were Fidelity Fiduciary Bank might you have any concerns with Barneys Oldyork

Corp? Explain why or why not.

Note: You may download and use this Excel file darr to complete your work, however please do not

upload your Excel work for this question $($it will slow the grading process$).$ Do answer the questions

thoroughly by providing supporting evidence $($i$.$e$.,$ reference your work$).$

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