Sample Essay
Current ratio and quick to tell us about the company’s ability to meet its short-term obligations. Credit company situation is alarming. Current Ratio of at least 1 should be there, but this ratio is far below the threshold in all three reporting year. In order to obtain financing, the company must have good solvency indicators such as debt to equity ratio, times interest, etc (Bendixen 2008). Although the company’s debt is growing а little situation is under control.
Working Capital Management
Inventory turn over ratio and receivables’ turnover ratio tells about the activities of the company in selling its inventory, and then cashing get out. They are useful indicators of how well the company manages its working capital. The company consistently having а good inventory turnover ratio. It stayed 14.07 days and 14.76 days and 13.48 days in 2009, 2008 and 2007, respectively. This indicates that the company holds in the optimal quantities, inventory items quickly moving. Receivables turnover ratio ‘remains constant in the range of 3-5, which does not indicate а very efficient management of receivables (Bell 2006). The company should collect its receivables more often and improve relations.
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