What recommendations relative to the amount and the handling of inventory could you make to the new owners? Explain What recommendations relative to the amount and the handling of accounts receivables could you make to the new owners? Explain What recommendations relative to the amount and the handling of accounts payables could you make to the new owners?
The new owners of Sheraton Natural Foods Inc. have hired you to help them diagnose and cure problems that the company has had in maintaining adequate liquidity. As a first step, you perform a liquidity analysis. You then do an analysis of the company’s short-term activity ratios. Your calculations and appropriate industry norms are listed.
Ratio Sheraton Industry Norm
Current ratio 4.5 4.0
Quick ratio 2.0 3.1
Inventory turnover 6.0 10.4
Average collection period 73 days 52 days
Average payment period 31 days 40 days
Requirements:
- What recommendations relative to the amount and the handling of inventory could you make to the new owners? Explain
- What recommendations relative to the amount and the handling of accounts receivables could you make to the new owners? Explain
- What recommendations relative to the amount and the handling of accounts payables could you make to the new owners?
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- What results, overall would you hope your recommendations would achieve ? What might your recommendation not be effective?
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