a)
To discuss:
The current ratio, quick ratio, inventories turnover, average collection period and the total assets turnover for each company.
Introduction:
Current ratio: Current ratio which is calculated by dividing current assets from current liabilities shows the ability of the corporation to pay of its current liabilities.
Quick ratio: Quick ratio is used to determine the company’s capability to satisfy dues using only liquid assets. Inventory is excluded from this ratio to show liquidity in better manner and it is also known as acid-test ratio.
Inventory turnover: Inventory turnover which reflects the number of times average inventory is converted into sales during a period is an asset management ratio that tells the manager how effectively they are managing the firm.
Average collection period: Average collection period evaluates the number of days required by the firm to collect its credit.
Total Assets Turnover Ratio: Total assets turnover ratio examines how effectively the asset of a firm is utilized.
b)
To determine:
Liquidity position.
Introduction:
Current ratio: Current ratio which is calculated by dividing current assets from current liabilities shows the ability of the corporation to pay of its current liabilities.
Quick ratio: Quick ratio is used to determine the company’s capability to satisfy dues using only liquid assets. Inventory is excluded from this ratio to show liquidity in better manner and it is also known as acid-test ratio.
c)
To determine:
Analyzing average collection period of receivables.
Introduction:
Average collection period: Average collection period evaluates the number of days required by the firm to collect its credit.
d)
To determine:
Analyzing inventory turnover and total assets turnover.
Introduction:
Inventory turnover: Inventory turnover which reflects the number of times average inventory is converted into sales during a period is an asset management ratio that tells the manager how effectively they are managing the firm.
Total Assets Turnover Ratio: Total assets turnover ratio examines how effectively the asset of a firm is utilized.
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Chapter 3 Solutions
PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
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