Homework 1 - TCA 321 online class Chapter 5 homework...

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TCA 321 online class Chapter 5 homework (Please review the chapter outline carefully before you do this homework). The Kaline Hotel has the following computed financial ratios and information for 2006 and 2005: 2006 2005 Current ratio 1.35 1.89 Acid-Test ratio 0.64 0.26 Inventory turnover 3.6 2.1 Debt / Equity ratio 2.5 1.8 Interest coverage 2.8 2.1 Profit Margin 9.2% 9.8% Operating Efficiency ratio 27% 23.9% ADR $40.57 $45.70 REVPAR $30.56 $28.51 a. Compare the liquidity situation of the two years. Did its liquidity improve or deteriorate in 2006? Why? The liquidity situation has improve from 2005 to 2006 because even though current ratio decrease the aid test ratio increase that means the quick assets such as cash, acc receivable increase, whereas inventory, which is the least liquid item among current assets, decrease. In other word inventory turnover increase from 2.1 to 3.6 increasing liquidity in the company as well. b. Compare the hotel’s solvency over the two years. Was the hotel more or less solvent in
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Homework 1 - TCA 321 online class Chapter 5 homework...

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