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 ample take stock, however, is strapped for cash as a 30 day deadline to pay a banking company business for $130,000 approaches with only $85,000 in reserves. In order to recreate his unfinished and future monetary obligations, Mr. beating-reed instrument mustiness transpose a portion of his $491,000 inventory into cash. 1. Calculate a some ratios and equal beating-reed instrument?s results with industry averages. What do these ratios insinuate?Reeds ClothiersIndustryLiquidity balancesCurrent Ratios 2.022.7Quick Ratios0.941.6Receivable Turnover4.97.7Average order of battle Turnover74.147.4Efficiency RatiosTotal Asset Turnover1.31.9Inventory Turnover2.97.0Payable Turnover7.015.1Profitability RatiosGross Profit Margin3033.0Net Profit Margin57.8Return on Common Equity1625.9Ratios be highly important profit tools in financial abstract that help financial analysts implement plans that emend profitability, liquidity, financial structure, reordering, leverage, and enkindle coverage. Although ratios report mostly on aside performances, they peck be predictive too, and provide lead indications of authorisation problem areas. Ratio analysis is primarily used to analyse a companys financial figures over a completion of time, a method sometimes called trend analysis. Through trend analysis, you can identify trends, inviolable and bad, and adjust your business practices accordingly. You can also see how your ratios can up against other businesses, both in and out of your industry.

on that point are several considerations you must be aware of when resemblance ratios from one financial period to another or when comparability the financial ratios of two or more companies. In comparing the financial ratios of Reed?s Clothiers to the averages of others in the same industry, it promptly becomes clear that Jim?s taste of keeping a heavy(p) inventory of clothing on advance was definitely having a negative impact on his business. Reed?s Clothiers inventory turnover ratio of 2.9 is extremely number one in comparison to the industry average of 7.0. Also Reed?s Clothiers restless ratio... If you want to get a secure essay, order it on our website: OrderCustomPaper.com

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