Reed's Clothier Case Study

IntroductionJim vibrating reed II, owner of beating-reed instrument?s Clothier, is facing monetary troubles. Reed is facing a potential loss of deliver by the First Virginia National Bank. A 30-day deadline is closing in on a $130,000 bank note. Reed has $85,000 cash in reserves and $491,000 in strain. To meet the financial obligations of the business, Reed all important(p) metamorphose a portion of the inscription into cash. Financial labyrinthine sense analysis will be provided to assess the past, present and coming(prenominal) day standings of the company, and to determine the best methods to restore the financial standings of the business. proportionality digest and InterpretationsFinancial dimensions ar valuable tools easily calculated and see from be in financial statements. Ratios can answer questions with attachment to debt and inventory, receivables terms, expenses and assets. Ratios be used to determine the financial strengths and weaknesses of a company. The ratios of Reed?s Clothiers, as shown in exhibit one, show that the erect amounts of inventory kept by the business negatively wedged the business. The inventory perturbation of Reed?s Clothier is 2.9, as shown in Exhibit 1. The industry average has an inventory turnover rate of 7.0. Reed?s Clothier also has a offset supple ration, when compared to the industry average. The low quick ratio shows an unfitness to convert current assets, excluding inventory, into cash.

The receivables turnover and the average tuckion decimal point are two additional indicators of financial troubles. The low receivables turnover is a sign that the business in unable to collect on its account receivables. The company has an ave! rage collection period of 74.1 days versus the industry average of 47.4 days. The payable turnover ratio is 7.0, less(prenominal) than half the 15.1 industry standard. These two ratios indicate Reed?s? inability to collect its receivables and its inability to repay its debts to creditors. (Ratio calculations... If you want to absorb a full essay, order it on our website: OrderEssay.net

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