Reed's Clothier Case Study

IntroductionJim vibrating reed II, owner of reed?s Clothier, is facing pecuniary troubles. Reed is facing a potential loss of conduct 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 requirement metamorphose a portion of the inscription into cash. Financial commensurateness analysis will be provided to assess the past, present and future day day standings of the company, and to determine the best methods to restore the financial standings of the business. dimension digest and InterpretationsFinancial proportions ar valuable tools easily calculated and see from be in financial statements. Ratios can answer questions with conceive 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 queen-sized amounts of inventory kept by the business negatively impact the business. The inventory disturbance rate of Reed?s Clothier is 2.9, as shown in Exhibit 1. The industry average has an inventory turnover of 7.0. Reed?s Clothier also has a downcast supple ration, when compared to the industry average. The low quick ratio shows an inability to convert current assets, excluding inventory, into cash.

The receivables turnover and the average question expiration are two additional indicators of financial troubles. The low receivables turnover is a sign that the business in unable to collect on its acc! ount receivables. The company has an average collection result 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 wear a full essay, order it on our website: OrderCustomPaper.com

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