Analysts argue that two of the most important ratios are inventory turnover and accounts receivable turnover.

Required:

For each financial year, answer the following questions:

a) You are analyzing ABC Company, a computer manufacturing company. Through observation, you find that this years inventory turnover is much lower than previous years. Give three explanations that parallel this observation. Explain whether you care about the results of these observations and how they will affect future financial results. (15 Marks)

b) You are analyzing ABC Company, a computer manufacturing company. You notice that this years account receivable turnover is much lower than the previous year. Give three explanations that parallel this observation. Explain whether this will be your concern. (15 Marks)