Reed's Clothier

1.
reeds clothier owned by Jim reed II is having financial difficulties. Jim went to startle Virginia National Bank to deem an extended line of credit when he found come to the fore the bank could no longer extend vibrating reeds Clothier line of credit because the company is having cash consort problems as well as the company may be in possible financial distress.
Jim is incumbently forty-five eld past due on his recent notes payable of $130,000 and Harold Holmes with First National Bank informs Jim he has thirty days to draw the note current. Jim is faced with a dilemma for bringing his current note current while his company is having financial difficulties. Harold has make a few suggestions to Jim to garter with the company. Harold suggests that Jim gets a consultant to look at the companys books to help find a solution to the financial problems the company is facing. Jim as well needs to reduce the inventory and accounts receivable to the sedulousness averages along with collecting past-due accounts from his customers.
2.
Liquidity ratios for Reeds Clothier compared to the attention ratios:
Current ratio for Reeds 1400/740 = 1.9 and the industry is 2.7. Reeds clothier is less than the industry ratio so it shows that they cannot meet their current obligations.
Quick ratio = (1400-790) / 740 = 610 / 740 = 0.8 for Reeds and 1.



6 for the industry. A quick ratio of 1 or high is accepted by most creditors and Reeds still have a quick ratio of 0.8 so creditors entrust hesitate on the company.
Receivables overthrow = 2860 / 580 = 4.9 for Reeds and 7.7 for the industry. Reeds shows that the accounts receivable turns about 5 times on average over the year.
Average collection period = 310 x 580 =179,800 / 2860 = 62.9 days. Reeds takes an average of 62.9 days to collect from customers where the industry takes 47.4 days to collect.

Efficiency Ratios:
Total asset turnover = 2860 / 940 = 3.043 x 100 = 304.3 Reeds and1.9 for the industry. The total asset turnover is to show how...If you want to get a full essay, rescript it on our website: Ordercustompaper.com



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