Question
Bluestone Metals, Inc., is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm's motto is If
Bluestone Metals, Inc., is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm's motto is "If you need it, we can make it." The CEO of Bluestone recently held a board meeting during which he said that the company has the capability to build any of its products using a lean manufacturing model that allowed the company to keep inventory levels low. As an investor, you have calculated some ratios to analyze the firm's performance.Bluestone's current ratios and quick ratios for the past 6 years are shown in the table below:
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |
Current ratio | 1.11.1 | 1.41.4 | 1.31.3 | 1.61.6 | 1.81.8 | 2.22.2 |
Quick ratio | 1.11.1 | 1.21.2 | 1.21.2 | 0.90.9 | 0.50.5 | 0.40.4 |
What do you think of the CEO's claim that the firm's manufacturing process aloows it to keep inventories low? (Hint: Is there a possible warning sign in the relationship between the two ratios?)
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