Reeds Clothier Inc Essay Example | Topics and Well Written Essays - 1000 words

beating-reed instruments Clothier Inc - Essay ExampleReeds Clothier Inc.To see the actual situation of the firm, we can hit forward and discuss Jims financial ratios. The first and most important ratio is the current ratio. This gives an idea of liquidity of the firm. It is not good not to be liquid or to be extremely liquidated. The best balanced sheet has a combination of fixed and current assets. Too many of receivables are not good although they may subjoin the value of assets but they indicate a weak receivable control system. The attention current ratio is 2.7, while for Jims company it is 2.01 (Calculated by dividing current assets with current liabilities) Quick ratio for the industry is 1.6. For Jim Reeds company it is 1.4. 1 1 is the least acceptable ratio. Reeds is lagging behind in both these ratios from industry standards. Another ratio that proves and shows that the Reeds company is in bad financial practice is Receivable turnover. If this ratio is high, it indica tes higher credit policy. If this ratio is low, it shows there are loopholes in receivables policy. The value for industry is 20.1 while this company has the ratio of 26.0. This once once again indicates that due to lack of attention, the company finances are suffering. (White, Sondhi and Fried, 1997) Inventory turnover needs to be high as that indicates good sales against inventory. The figure for industry is 7 which is good. The exhibit 5 show that in case of Reeds the sales are related to inventory, but with increasing stock the increase in sales is not correlation.