Problem
Financial data for Industrial Inc. is as follows: ($ in thousands)
|
|
Year 1
|
Year 2
|
|
Sales
|
$160,835
|
$274,219
|
|
Cost of goods sold
|
$141,829
|
$209,628
|
|
Net income
|
-$ 91,432
|
-$257,981
|
|
Cash flow from operations
|
-$35,831
|
-$12,538
|
|
Balance Sheet
|
|
|
|
Cash
|
$236,307
|
$164,952
|
|
Marketable securities
|
$209,670
|
$22,638
|
|
Accounts receivable
|
$12,645
|
$21,655
|
|
Inventories
|
$3,971
|
$40,556
|
|
Total current assets
|
$462,593
|
$249,801
|
|
Accounts payable
|
$17,735
|
$13,962
|
|
Accrued liabilities
|
$27,184
|
$76,596
|
|
Total current liabilities
|
$44,919
|
$90,558
|
A. Calculate the current and quick ratio at the end of each year. How has the company's short-term liquidity changed over this period?
B. Assuming a 365-day year for all calculations, compute the following ratios and provide your interpretation of the company's performance as suggested by these ratios:
a. The collection period each year based on sales.
b. The inventory turnover each year.