Liquidity management bauman company total current assets


Task: Liquidity management Bauman Company’s total current assets, net working capital, and  inventory for each of the past four years follow:

item

2005

2006

2007

2008

Total current assets

$16,950

$17,450

$18,230

$20,165

Net working capital

7,950

8,760

9,765

12,035

Inventory

7,000

8,150

9,600

8,130


Question 1: Calculate the firm’s current and quick ratios for each year. Compare the resulting time series of each measure of liquidity.

Question 2: Comment on the firm’s liquidity over the 2005–2008 period.

Question 3: If you were told that Bauman Company’s average age of inventory for each year in the 2005–2008 period and the industry averages were as follows, would this support or conflict with your evaluation in part (2) ? Explain.

item

2005

2006

2007

2008

Total current assets

$16,950

$17,450

$18,230

$20,165

Net working capital

7,950

8,760

9,765

12,035

Inventory

7,000

8,150

9,600

8,130

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