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The following ratios are available for agricultural chemicals competitors Potash Corporation of Sas katchewan (Potash-Corp) and Agrium

Question:

The following ratios are available for agricultural chemicals competitors Potash Corporation of Sas katchewan (Potash-Corp) and Agrium for a recent year:
The following ratios are available for agricultural chemicals competitors Potash

Instructions
(a) Which company is more liquid? Explain.
(b) Which company is more solvent? Explain.
(c) Which company is more profitable? Explain.
Taking It Further
The price-earnings ratio for Potash Corp is 12.3 times, compared with Agrium's PE ratio of 9 times. Which company do investors favour? Is your answer consistent with your analysis of the two companies' profitability in (c)?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Transcribed Image Text:

PotashCorp Agrium 0 Receivables turnover Inventory turnover 8 2 5

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a Potash is more liquid Its inventory and receivables turnover much faster than do Agriums ...View the full answer


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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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