Finance Case Study Example | Topics and Well Written Essays - 1250 words

Finance - Case Study Example The company’s liquidity position was 2 .3 in the year 2008. This means that for every $1 of liability, the company had $2.3. This is an extremely good ratio indicating that the company can easily payoff of it short-term debts without having to suffer any liquidity problems. Similarly, this ratio is close to the ideal current ratio and indicates that cash not lying idle. In the year 2009, this ratio worsened and came down 1.5 indicating that the company has $1.5 of assets to pay off every $1 of liability. The company can still payoff of its debts easily without having to go through much trouble, given that the large portion of current assets is not tied-up in the form of inventory. In the year 2010, the ratio again improved and came at par with the ratio in the year 2008, showing that there will be no liquidity problems in paying off current liabilities. Going deeper into the analysis and checking the Quick Ratio, we can see that like the current ratio it declined in the year 2 009 from 0.8 in 2008 to 0.5 in 2009. However, it again improved in the year 2010 and came to 0.92. However, this ratio remained really bad during the three years indicating that a large chunk of company’s current resources are tied into inventory and they will have problems in clearing its current debts and liquidity problems look imminent. The ratio remained lower the industry average, but since the company’s ratio is more close to the ideal ratio, we can say that the company is managing its resources better than other companies in the same industry. Inventory Turnover is constantly decreasing from what it was in the year 2008. It was 4.8 in the year 2008 and came down to 4.5 in the year 2009 and 3.86 in the year 2010. This shows that the company’s performance is deteriorating. Similarly, it is not performing to well as compared to the industry average which is around.