Shown below are liquidity ratios for several companies.

Instructions
For each of the following questions, choose the appropriate company and explain why you chose that company by referring to the ratios shown above.
(a) Which company sold common shares recently and has not yet invested all of the cash raised from the share issue? Why?
(b) Which company has had difficulty obtaining products from its suppliers? Why?
(c) Which company may have a credit policy that is too tight? Why?
(d) Which company is managing its working capital most effectively? Why?

Transcribed Image Text:

Company Company Company CompanyIndustry #2 #3 #4 Average 1.2:1 45 days #1 Current ratio 1.5:1 1.6:1 1.3:1 2.9:1 Average collection period 29 days57 days 39 days52 days Days in inventory71 days 20 days 50 days 65 days 60 days