Reed's Clothier Case Study

IntroductionJim vibrating reed II, owner of reed instrument?s clothier, is facing fiscal troubles. reed is facing a potential loss of abide by the First Virginia home(a) Bank. A 30-day deadline is closing in on a $130,000 verify note. vibrating reed has $85,000 cash in reserves and $491,000 in strain. To learn the fiscal obligations of the commercial enterprise, Reed necessity metamorphose a lot of the inscription into cash. Financial relaxation analysis will be provided to assess the past, present and hereafter day standings of the keep company, and to go over the scoop up methods to restore the financial standings of the business. proportionality digest and InterpretationsFinancial ratios ar worthful tools easily calculated and see from be in financial statements. Ratios can answer questions with watch 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 swage of Reed?s Clothier is 2.9, as shown in Exhibit 1. The constancy reasonable has an inventory swage of 7.0. Reed?s Clothier also has a diminished supple ration, when compared to the industry average. The pocket-sized quick ratio shows an softness to convert current assets, excluding inventory, into cash.

The receivables dollar volume and the average lay awayion hitch are twain supernumerary 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 average collection menstruation 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? unfitness to collect its receivables and its inability to repay its debts to creditors. (Ratio calculations... If you want to waste a full essay, put it on our website: Ordercustompaper.com

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