Park Avenue Tire Company has been operating in Winnipeg for more than 30 years and has a

Question:

Park Avenue Tire Company has been operating in Winnipeg for more than 30 years and has a very loyal customer base. The company sells and installs tires and the owners pride themselves on the excellent business relationships they have developed with both their customers and suppliers. The company often sells tires on credit, allowing customers to pay their balances within 30 days. Collection of has never been a problem, with most people paying their balances within 60 days.
Park Avenue purchases tires from most of the large national brands and, due to the nature of the business, generally maintains a fairly large inventory. It is essential that the company have the necessary tires on hand to meet customer needs due to increased competition from large retailers such as Canadian Tire and Walmart.
Required:
Prepare a report for Chris Park detailing options that he can take to alleviate the company’s cash problems. Remember that you are to present options, not recommendations. As a basis for the report, you should calculate and comment on the following ratios:
a. Current ratio
b. Quick ratio
c. Receivables turnover ratio and average collection period
d. and days in inventory
Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...