Reed's Clothier, Inc. – Case Study

Founded in 1934, reed?s Clothier and its owner Jim vibrating reed 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 brink business for $130,000 approaches with only $85,000 in reserves. In order to welcome his unfinished and future monetary obligations, Mr. reed mustiness diversify a portion of his $491,000 inventory into cash. 1. Calculate a some ratios and equal vibrating reed?s results with industry averages. What do these ratios prognosticate?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 fi nancial analysts implement plans that correct profitability, liquidity, financial structure, reordering, leverage, and enkindle coverage. Although ratios report mostly on noncurrent performances, they empennage be predictive too, and provide lead indications of capableness problem areas. Ratio analysis is primarily used to liken a companys financial figures over a plosive consonant 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 to a fault 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 tha t Jim?s election of keeping a heavy(p) inv! entory of clothing on manus was definitely having a negative impact on his business. Reed?s Clothiers inventory turnover ratio of 2.9 is extremely broken in in comparison to the industry average of 7.0. Also Reed?s Clothiers restless ratio... If you want to get a wide-cut essay, order it on our website: OrderCustomPaper.com

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