S&S Air Inc. Mini Case – Ch 3 Essay
Current Ratio = Current assets/current liabilities = $1,561,800/$2,085,000 = 0.75
Quick (or acid-test) Ratio = (Current Assets – Inventory)/Current liabilities = ($1,561,800 - 740,800) /$2,085,000 = 0.39
Cash Ratio = Cash + Cash equivalents/Current Liabilities = $315,000/$2,085,000 = 0.15
Total asset turnover = Sales/Total assets = $21,785,300/$13,077,800 = 1.67 times
Inventory turnover = Cost of goods sold/Inventory = $15,874,700/740,800 = 21.43 times
Receivables turnover = Sales/Accounts receivable = $21,785,300/$506,000 = 43.05 times
Total debt ratio = [Total assets – Total equity]/Total assets = [$13,077,800 - $7,192,800]/$13,077,800 = 0.45
Debt/equity …show more content…
Short-term Solvency or Liquidity Measures
When compared with the industry, the current ratio of S&S Air at 0.75 is below the industry median of 1.43. This may mean that S&S Air are having liquidity problems.
When compared with the industry, the quick ratio of S&S Air at 0.39 is just over the industry median of 0.38. This indicates that S&S Air is not among the best or the worst at managing current accounts as indicated by liquidity.
When compared with the industry, the cash ratio of S&S Air at 0.15 is below the industry median of 0.21. Again, this could indicate liquidity problems within S&S Air or may need improvement in managing current accounts.
Asset Management, or Turnover Measures
When compared with the industry, the total asset turnover of S&S Air of 1.67 times is well above the