Reed Case Study

Q. Briefly summarize the case. In rule to increase trades, Reeds clothier concentrated on increasing schedule. They were afraid that lower inventory level will harm sales. Company renovated the stores and tripled the inventory. But sale did not increase as they expected. While they tripled the inventory, sales double only. This resulted in excess inventory. Money was stuck up in inventory. or else of analyzing the bother and addressing the root cause, company requireed it as cash problem and tried to solve the problem by having progressively larger line of credit. But increasing the line of credit could not solve the problem. When banks demanded payment, severity of the issue came to the attention of the owners of Reeds Clothier. Now they be trying to analyzing financial problem and finding solution. Q. Calculate a few ratios and comp be Reeds results with industry averages. (Some industry averages are shown in Exhibit 4.) What do these ratios indicate? Answer: Formulae: online symmetry = electric accredited assets/current liabilities Quick Ratio = (current assets-inventory)/current liabilities Gross bring in Margin = EBIDTA/sales           Net Profit Margin = PAT/Sales             Ratio                                                   Reeds                            Industry Current Ratio                   2.

0                                 2.7                 Quick   Ratio 0.94                     1.6 Gross Profit Margin 29.8%                       33% Net Profit Percentage                       4.2%                              7.8% Reeds has current ratio lower than the industry average which indicates that company may be experiencing liquidity problem. Low current ratio agent company may find it difficult to meet footling term debt requirements. In the same line, quick ratio of Reeds is importantly lower than the industry average. Quick ratio does not consider inventory (which is... If you want to get a full essay, order it on our website: Orderessay

If you want to get a full essay, wisit our page: write my essay .