A disadvantage of extending credit to customers is that the cost may ______ the additional sales revenue received through credit
1 answer:
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Answer:
Current Ratio 1,88 1,74 1,79 1,55
Quick Ratio 1,22 1,19 1,24 1,14
<u>The Company liquity decrease over time</u>
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During 2012-2015 The Company adquire more assets on account because both increase in a similar ammount
The Company's liquity is enought to cover their obligation so it is facing no problem of liquity
The Inventory TO being lower is a sing that if the company makes the endeavor of increase their sale it will increase their liquity. So it could be see as a good sing, because they have room to improve and generate more cash.
Explanation:
The Current Ratio will be:
Remember that:
<em>current assets:</em> concepts that are cash or will become cash within a year.
<em>current laibilities: </em>obligation to pay or do that will be settle within a year.
Year 2012 2013 2014 2015
Assets 16950 21900 22500 27000
Liabilities 9000 12600 12600 17400
Current Ratio 1,88 1,74 1,79 1,55
Now the Quick Ratio will be:
This is a more harder ratio, because we are asking, what would happen if the company doesn't convert any of their inventory in cash within a year.
Year 2012 2013 2014 2015
Assets 16950 21900 22500 27000
Inventory 6000 6900 6900 7200
Quick Assets 10950 15000 15600 19800
Liabilities 9000 12600 12600 17400
Quick Ratio 1,22 1,19 1,24 1,14
<u>The Company liquity decrease over time</u> as you can see.
Inventory TurnOver:
Sales / Average Inventory
This is a value to check how many times the company is selling their inventory, a high value means it is selling their inventory fast, and thereforetheir inventory cost for keeping the merchandise, lower.
If the value is lower it may mean that the company is stocking in excess or it may be having problems doing sales.
The Bauman Company is having a lower rotation than the industry so it may be cause their inventory is higher than other industries or it may not be doing quite well on the marketing department.