You have been provided with the following information about Altario Ltd. (Altario).

Additional information:
• Altario gives its customers 30 days to pay for their purchases. After 30 days interest is charged.
• Most of Altario's suppliers allow 30 days for payment. Most offer discounts if payment is received within 10 days.
a. Calculate the accounts receivable, inventory, and accounts payable turnover ratios for 2015 through 2017.
b. Calculate the average collection period of accounts receivable, average number of days inventory on hand, and average payment period for accounts payable for 2015 through 2017.
c. Determine Altario's cash lag for 2015 through 2017.
d. Interpret the results you obtained in (a) through (c). What do these results tell you about Altario's liquidity over the last three years? What are some possible explanations for the results? Make recommendations for improving the management of receivables, inventory, and payables.
e. Suppose you are a banker that Altario's management approached about an expanded line of credit. How would the results you obtained in (a) through (c) affect your decision? Explain.

  • CreatedFebruary 26, 2015
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