Three ratios calculated for Puckerman, Cohen, and Chang Companies for 2010 and 2011 follow. Required: Explain which
Question:
Required:
Explain which company appears to be the most liquid.
(in millions) Current ratio Inventory turnover ratio Quick ratio Cohen Chang 1.8 to 1 2.2 to 1 12/31/11 12/31/10 12/31/11 12/31/10 12/31/11 12/31/10 2.8 to 1 2.0 to 1 6.9 times 7.6 times 2.5 to 1 1.0 to 1 2.3 to 1 1.5 to 1 5.8 times 8.0 ties 5.8 times 9.6 times 2.1 to 1 1.4 to 1 0.5 to 1 1.2 to 1
Step by Step Answer:
For 2011 Puckerman Company appears to be the most liquid c...View the full answer
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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