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Selected ratios for two companies are as follows: Instructions (a) Which company is more liquid? Explain. (b)

Question:

Selected ratios for two companies are as follows:
Selected ratios for two companies are as follows: Instructions (a) Which company

Instructions
(a) Which company is more liquid? Explain.
(b) Which company is more solvent? Explain.

Transcribed Image Text:

Grenville Portage Current ratio Receivables turnover Inventory turnover Cash current debt coverage Debt to total assets Times interest earned Cash total debt coverage 1.2:1 20 times 2 times 0.3 times 20% 20 times 0.1 times 1.7:1 10 times 4 times 0.4 times 60% 5 times 0.2 times

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a Grenville appears to be the more liquid of the two companies The company has more assets to repay ...View the full answer


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Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.

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