Simeon Case Study

Improved Essays
Exercise 17-7
1.
Current ratio = Current asset Current liability

2008
(\$378,00+502,00+54,000+5,000 )/(\$51,250) = 2.87 : 1

2009 (\$35,625+62,500+82,500+9,375)/(\$75,250) = 2.52 : 1

2010 (\$31,800+89,500+112,500+10,700)/(\$129,900) = 1.88 : 1

The current ratio is declining from 2008 , 2.87 : 1 to 2010 ,1.88 : 1.Therefore, the short-term debt-paying ability for Simeon Company is decrease.

2.
Acid –test ratio = cash+ short-term investment+ Current receivable
Current liabilities

2008
\$37,800+50,200 = 1.72 : 1
\$51,250

2009
\$35,625+62,500 = 1.30 : 1
\$75,250

2010
\$31,800+89,500 = 0.93 : 1
\$129,900

The acid-test ratio is declining from 2008 ,1.72 : 1 to 2010 0.93 : 1. Therefore the immediate short-term
Therefore ,the liquidity of receivables for Simeon Company is decrease.

3
Inventory turnover =Cost of goods sold Average inventory

2009
\$345,500/((\$82,500+54,000)/2) = 5.06 times

2010
\$411,225/((\$112,500+82,500)/2) = 4.22 times

The inventory turnover is decrease from year 2009, 5.06 times to 2010, 4.22 times. Therefore , the efficiency of inventory management for Simeon Company is decrease.

4
Days’ sales in inventory =( Ending inventory)/(Cost of goods sold ) X 365

2009
\$82,500/(\$345,500 ) X 365 = 87.16 days

2010
\$112,500/(\$411,225 ) X 365 = 99.85 days

The days’ sales in inventory is increase from year 2009 , 87.16 days to 2010 ,99.85 days. Therefore ,the liquidity of inventory for Simeon Company is decrease.

5
Account payable turnover = Cost of goods sold Average account payable

2009
\$345,500/((\$75,250+51,250)/2)= 5.46 times

2010
\$411,225/((\$129,900+75,250)/2) = 4 times

The account payable turnover is decrease from year 2009 ,5.46 times to 2010 4 times. Therefore, the frequency of trade credit payments for Simeon Company is
Therefore, the efficiency of collection for Simeon Company is decrease.

2
Days’ sales uncollected = (Account receivable ,net )/(Net sale)X365

2009
\$62,500/\$532,000 X 365 = 42.88 days

2010
\$89,500/(\$673,500 )X 365 = 48.50 days

The days’ sale uncollected is increase from year 2009, 42.88 days to 2010, 48.5 day. Therefore ,the liquidity of receivables for Simeon Company is decrease.

3
Inventory turnover =Cost of goods sold Average inventory

2009
\$345,500/((\$82,500+54,000)/2) = 5.06 times

2010
\$411,225/((\$112,500+82,500)/2) = 4.22 times

The inventory turnover is decrease from year 2009, 5.06 times to 2010, 4.22 times. Therefore , the efficiency of inventory management for Simeon Company is decrease.

4
Days’ sales in inventory =( Ending inventory)/(Cost of goods sold ) X 365

2009
\$82,500/(\$345,500 ) X 365 = 87.16 days

2010
\$112,500/(\$411,225 ) X 365 = 99.85 days

The days’ sales in inventory is increase from year 2009 , 87.16 days to 2010 ,99.85 days. Therefore ,the liquidity of inventory for Simeon Company is decrease.

5
Account payable turnover = Cost of goods sold Average account payable

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