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The financial statements of Anglo American Platinum Limited (Amplats) are presented in Appendix B following the financial

Question:

The financial statements of Anglo American Platinum Limited (Amplats) are presented in Appendix B following the financial statements for Eastern Platinum Limited (Eastplats) in Appendix A.

Instructions

(a) Calculate the current ratio for each company for 2010.

(b) Calculate the inventory turnover and days in inventory ratios for each company for 2010. (Use "cost of operations" as equivalent to cost of goods sold for Eastplats.)

(c) The 2010 industry average for the current ratio was 2.3:1; the inventory turnover was 3.0 times; and the days in inventory was 122 days. What conclusions about each company's liquidity in 2010 can you draw based on your results in (a) and (b) and the industry averages?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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a b c Amplatss current ratio of 21 is not only below that of Eastplatss very high current ratio of 1...View the full answer


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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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