Individual Assignment Week 4

Individual Assignment Week 4 - REEDS CLOTHIER CASE STUDY 1...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
REED’S CLOTHIER CASE STUDY Reed’s Clothier Case Study Jonathan Chretien University of Phoenix FIN370 John Scherzi July 18 th , 2010 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
REED’S CLOTHIER CASE STUDY Reed’s Clothier is a men’s clothing establishment that was established in 1934. Until 1981, Reed’s Clothier had been a successful organization. In 1981, Jim Reed II decided to finance a remodel for the store, which cost $880,000. Because of this rather expensive remodel, the cash flow of Reed’s Clothier was diminished. Because of this Jim Reed was starting to fall behind on paying suppliers, who were threatening Reed’s Clothier with the ceasing of all deliveries until the payment was made. Because of this, Jim thought he would be able to just go get a loan from the bank. Because of his financial status with Reed’s Clothier, Holmes was unable to grant the loan and gave Jim Reed some advice on how to improve his financial ratios, which would help Jim long-term. Not only for future loans, but to help Jim Reed with his finances. 1) Calculate a few ratios and compare Reed's results with industry averages. (Some industry averages are shown in Exhibit 16.4 .) What do these ratios indicate? Ratios Liquidity Ratios Reed Industry Current ratio 2. 0 2.7 Quick ratio 0.9 4 1.6 Receivables turnover 4.9 3 7.7 Average collection period 74.0 8 47.4 Efficiency Ratios Total asset turnover 1.2 8 1.9 Inventory turnover 2.9 1 7 Payable turnover 6.9 7 15.1 Profitability Ratios Gross profit margin 29.8% 33 Net profit margin 4.2% 7.8 Return on common equity 16.0% 25.9 2
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/19/2010 for the course FIN 370 taught by Professor Unknown during the Spring '08 term at University of Phoenix.

Page1 / 6

Individual Assignment Week 4 - REEDS CLOTHIER CASE STUDY 1...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online