Reed's Clothier Case Study

IntroductionJim vibrating reed II, owner of vibrating reed?s Clothier, is facing fiscal troubles. Reed is facing a potential loss of be 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 equilibrium analysis will be provided to assess the past, present and succeeding(a) day standings of the company, and to determine the best methods to restore the financial standings of the business. dimension digest and InterpretationsFinancial symmetrys ar valuable tools easily calculated and taken from be in financial statements. Ratios can answer questions with go steady 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 striking amounts of inventory kept by the business negatively wedged the business. The inventory dollar volume of Reed?s Clothier is 2.9, as shown in Exhibit 1. The industry average has an inventory overthrow of 7.0. Reed?s Clothier also has a dispirited supple ration, when compared to the industry average. The low quick ratio shows an softness to convert current assets, excluding inventory, into cash.

The receivables turnover and the average sop upion breaker 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 receivab! les. The company has an average collection consequence 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 tick a full essay, order it on our website: OrderCustomPaper.com

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