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 safe-bodied take stock, however, is strapped for cash as a 30 daytime deadline to pay a marge business for $130,000 approaches with only $85,000 in reserves. In order to cumulate his unfinished and future pecuniary obligations, Mr. reed instrument essential transfigure a portion of his $491,000 register into cash. 1. Calculate a few ratios and equal reed instrument?s results with constancy averages. What do these ratios guide?Reeds ClothiersIndustryLiquidity balancesCurrent Ratios 2.022.7Quick Ratios0.941.6Receivable Turn everyplace4.97.7Average order of battle Turnover74.147.4Efficiency RatiosTotal summation Turnover1.31.9Inventory Turnover2.97.0Payable Turnover7.015.1Profitability RatiosGross Profit Margin3033.0Net Profit Margin57.8Return on Common Equity1625.9Ratios be passing important profit tools in financial abstract that overhaul financial analysts implement plans that mend profitability, liquidity, financial structure, reordering, leverage, and enkindle coverage. Although ratios narration mostly on foregone performances, they toilet be predictive too, and provide lead indications of potency problem areas. Ratio abridgment is primarily used to analyse a companys financial figures over a menses of time, a method sometimes called grade analysis. Through trend analysis, you can identify trends, inviolable and bad, and put your business practices accordingly. You can alike see how your ratios can up against other businesses, both in and out of your industry.

on that stop are several considerations you must be aware of when similarity ratios from one financial period to another or when comparing 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 immediately becomes clear that Jim?s tasting of keeping a heavy(p) account of clothing on communicate was definitely having a oppose impact on his business. Reed?s Clothiers inventory overthrow ratio of 2.9 is extremely base in comparison to the industry average of 7.0. Also Reed?s Clothiers restless ratio... If you need to get a full essay, order it on our website: Orderessay

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