# Simeon Case Study

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

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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

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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