The new owners of Popular Choice Bhd., have hired you to help diagnose and solve problems that the company has had in maintaining adequate liquidity.
As a first step, you perform a liquidity analysis. You then do an analysis of the company's short-term activity ratios. Your calculations and appropriate industry norms are listed.
|
Ratio
|
Organic Food
|
Industry Norm
|
|
Current ratio
|
4.5
|
4.0
|
|
Quick ratio
|
2.0
|
3.1
|
|
Inventory turnover
|
6.0
|
10.4
|
|
Average collection period
|
73 days
|
52 days
|
|
Average payment period
|
31 days
|
40 days
|