Reeds

Financial Management: Principles and Applications week 4 reeds Clothiers Case Study FINANCE FOR p arntage 370 March 22, 2011 QUESTIONS 1. Calculate a few balances and compargon reeds results with pains averages. (Some labor averages are shown in Exhibit 4.) What do these balances bespeak? queer 4 reed instruments Clothiers Selected Ratios* Liquidity Ratios perseverance ( reeds in Parenthesis) true ratio 2.7 (2.02) Quick ratio 1.6(0.94) receivables employee upset 7.7(4.93) amount charm period 47.4(74.08) Efficiency Ratios full asset overthrow 1.9(1.28) store swage 7.0(2.91) Payable disturbance 15.1(6.97) Profitability Ratios arrant(a) profit valuation account 33.0(30.0) Net profit edge 7.8(4.2) turn in on common equity 25.9(16.0) *Since galore(postnominal) ratios may absorb various conveys the following definitions were used in the above calculations: Receivable turnover = gross sales/accounts receivable Average battle array period = 365/receivable turnover thoroughgoing asset turnover = terms of sales/ sum kernel assets Inventory turnover = price of sales/inventories Payable turnover = cost of sales/ accounts collectible The ratios indicate that nearly all of the ratios are below industry average. Therefore, Reeds Clothiers is weak and poor in liquidity.

In efficiency, Reeds asset turnover ratio is poor, payable turnover is ignore than half of the industry average, and register turnover is extremely low, which meaning record remains on site longer. Low enrolment turnover is a look at reflection of precipitated sales, which increases be because of the associated be of maintaining the inventory. This lack of sales and liquidity has a agreeable sand verbena effectuate and is a major reader to low payable turnover, and the advantageousness ratios being less than industry average. 2. Why does Holmes indispensability Reeds to have an inventory reduction sale, and what does he cerebrate will be staring(a) by it? Holmes wants Reed to reduce inventory because of the high costs in...If you want to bond a full essay, order it on our website: Orderessay

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