The following selected ratios are available for Tianjin Inc. for the most recent three years:
________________________2018_____2017______2016
Current ratio...........................1.5:1..........1.5:1............1.5:1
Receivables turnover..........8 times......7 times.........6 times
Inventory turnover..............6 times......7 times.........8 times
Instructions
(a) Calculate the average collection period and days in inventory for each year.
(b) Is Tianjin's liquidity improving or worsening? Explain.
(c) Do changes in turnover ratios affect profitability? Explain.
(d) Do changes in turnover ratios affect cash flow? Explain.
(e) Identify any steps that the company may wish to consider in order to improve its management of receivables and inventory.