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- mgt201 gdb no 1 fall 2012 full solution
Posted by : Anonymous
Wednesday, 24 October 2012
Ratio analysis
Learning Objective:To understand the key decisive factor in [COLOR=#0000FF !important]working capital management[/COLOR] with the help of [COLOR=#0000FF !important]liquidity ratios[/COLOR].
Learning Outcome:
After going through this GDB, the student will be able to recognize the importance of working capital management.
The Case:
Eco Tyre Ltd. (ETL) - incorporated in year 2003 and entered into [COLOR=#0000FF !important]automobile tyre[/COLOR] manufacturing [COLOR=#0000FF !important]business by[/COLOR]introducing a [COLOR=#0000FF !important]new tire[/COLOR] [COLOR=#0000FF !important]manufacturing technology[/COLOR]. Over the years, ETL has been recognized as a tyre market leader. But, now a day, ETL is facing hard time due ineffective control of its working capital items.
Following data has been developed from its comparative balance sheets:
Ratio
|
FY 2010
|
FY 2011
|
Current Ratio |
0.60 Times
|
0.79 Times
|
Quick Ratio |
0.45 Times
|
0.61 Times
|
Return on Asset |
9.7%
|
12.5%
|
Inventory Turnover |
28 Times
|
15 Times
|
Avg. Collection Period |
13 Days
|
24 Days
|
Short-term Debt |
4 million
|
4 million
|
Total Asset Turnover Ratio |
2 Times
|
5 Times
|
Credit Sales to Cash Sales Ratio |
0.45 Times
|
0.67 Times
|
Being a financial analyst, do you think the [COLOR=#0000FF !important]liquidity[/COLOR] of a company is satisfactory?