Reed's Clothier Case Study

IntroductionJim vibrating reed II, owner of vibrating reed?s Clothier, is facing monetary troubles. Reed is facing a potential loss of make 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 immanent metamorphose a portion of the inscription into cash. Financial sleep analysis will be provided to assess the past, present and rising day standings of the company, and to determine the best methods to restore the financial standings of the business. symmetry digest and InterpretationsFinancial ratios ar valuable tools easily calculated and construe from be in financial statements. Ratios can answer questions with find out 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 i n exhibit one, show that the boastful amounts of inventory kept by the business negatively squeeze the business. The inventory disorder 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 execrable 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 takeion layover are two additional indicators of financial troubles. The low receivables turnover is a sign that the business in unabl e to collect on its account receivables. The! company has an average collection stream 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 tire out a full essay, order it on our website: OrderCustomPaper.com

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