Jim Reed

Jim beating-reed instrument II is the owner of reed instruments haberdasher since 1976. The company is facing pecuniary difficulties. Therefore, Jim is seeking for financial aid by the First Virginia National Bank. A 30-day deadline is termination in on a $130,000 bank note. reed has $85,000 bullion in reserves and $491,000 in arsenal. To meet the financial obligations of the business, Reed mustiness convert a portion of the stock-take into cash. Financial ratio analysis will be provided to assess the past, present and coming(prenominal) standings of the company, and to work the best methods to restore the financial standings of the business. The ratios of Reeds haberdashers, as shown in exhibit 16.1, show that the large amounts of inventory pick out negatively impacted the business. The inventory turnover rate of Reeds Clothier is 2.9, as shown in Exhibit 16.1. The patience just has an inventory turnover of 7.0. Reeds Clothier similarly has a gloomy fast ration, when compared to the industriousness average. The low quick ratio shows an softness to convert current assets, excluding inventory into cash. The receivables turnover and the average collection period are dickens supernumerary indicators of financial troubles. The low receivables turnover is a bell ringer that the business in unable to collect on its realize receivables. The company has an average collection period of 74.

1 eld versus the industry average of 47.4 days. The payable turnover ratio is 7.0 less(prenominal) than fractional the 15.1 industry standard. These two ratios indicate Reeds inability to c ollect its receivables and its inability to ! repay its debts to creditors. Exhibit 16.1 liquid balances Reeds Clothiers Industry Current Ratio2.0, 2.7 Quick Ratio 0.9 1.6 Receivables turnover 4.9, 7.7 Average Collection Period 74.1, 47.4 Efficiency Ratios wide summation employee turnover 0.9, 1.9 Inventory Turnover 2.9, 7.0 Payable Turnover 7.0, 15.1 lucrativeness Ratios Gross Profit margin 0.3 33.0 Net Profit boundary line 5.0, 7.8 Return on Common Equity 0.2, 25.9 Inventory reducing Sale Reeds Clothiers...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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