Reed's Clothier, Inc. – Case Study

Founded in 1934, reed?s Clothier and its owner Jim reed instrument II, is faced with loosing financing. The company has plentiful take stock, however, is strapped for cash as a 30 twenty-four hour termination deadline to pay a assert business for $130,000 approaches with only $85,000 in reserves. In order to hit his unfinished and future monetary obligations, Mr. reed moldiness qualify a portion of his $491,000 caudex into cash. 1. Calculate a fewer ratios and equal reed instrument?s results with manufacturing averages. What do these ratios suggest?Reeds ClothiersIndustryLiquidity balancesCurrent Ratios 2.022.7Quick Ratios0.941.6Receivable Turn everywhere4.97.7Average order of battle Turnover74.147.4Efficiency RatiosTotal addition Turnover1.31.9Inventory Turnover2.97.0Payable Turnover7.015.1Profitability RatiosGross Profit Margin3033.0Net Profit Margin57.8Return on Common Equity1625.9Ratios be super important profit tools in financial abstract that foster financial analysts implement plans that ameliorate profitability, liquidity, financial structure, reordering, leverage, and enkindle coverage. Although ratios study mostly on other(prenominal) performances, they rear end be prognostic too, and provide lead indications of potence problem areas. Ratio depth psychology is primarily used to discriminate a companys financial figures over a period of time, a method sometimes called crook analysis. Through trend analysis, you can identify trends, inviolable and bad, and typeset your business practices accordingly. You can too see how your ratios can up against other businesses, both in and out of your industry.

on that stoppage are several considerations you must be aware of when simile ratios from one financial period to another or when compare the financial ratios of two or more companies. In analyze the financial ratios of Reed?s Clothiers to the averages of others in the same industry, it directly becomes clear that Jim?s taste sensation of keeping a heavy(p) gunstock of clothing on mint was definitely having a ban impact on his business. Reed?s Clothiers inventory dollar volume ratio of 2.9 is extremely crushed in comparison to the industry average of 7.0. Also Reed?s Clothiers restless ratio... If you regard to get a adequate essay, order it on our website: Orderessay

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