Stone company produces electronic components. Lately, the company has been facing a drop in sales because of fierce competition and a downturn in the market. Consequently, Stone Corporation's cash reserves have been dwindling, causing worries about the company's liquidity position.

Data in $:

Current assets:

Cash 20,000

Account receivable $50,000

Inventory 100,000

Marketable securities 30,000

Current liabilities

Account payable 40,000

Short-term debt 80,000

Sales have declined by 20% over the last month, and the collection period for receivable has increased from 30 to 45 days.

The company's inventory turnover has dropped from 6 to 4 times a year.

As the CFO of Stone Company, your main responsibility is to assess the company's liquidity and ensure it can fulfill its short-term obligations.

1. Calculate the two liquidity ratios: current ratio; quick ratio

2. Discuss the impact of the decrease in inventory turnover on the company's liquidity.

3. Provide recommendations to improve Stone Company's liquidity position

Answer rating: 100% (QA)

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