CHAPTER $2$ Measures of Solvency and Liquidity $|51$

Is it possible for the quick ratio to exceed the current ratio?

Andrieux Industries has a WCR of $$10$ million. Interpret this firm's WCR$.$

How would you interpret a DCH of go days?

Describe ways to increase the DCH$.$

How would you interpret a NLB of $-$$$400,000?$

What might decrease the NLB$?$

How would you interpret a $$ of $0\mathrm{.}50?$

A firm currently has a $$ of $1\mathrm{.}80.$ Determine the effect of the following on $($assuming all else constant$)$:

a$.$ Decreased cash holdings

b$.$ A greater portion of the credit line is used

c$.$ Decreased average daily net cash flow

d$.$ Decreased standard deviation of daily net cash flow

What would be required for $$ to fall below $0\mathrm{.}00?$

Discuss the trend in DCH$.$

Use the summarized financial information for The J$.$ Willis Holding Company $($JWHC$)$ shown in the table

below for problems $1$ through $4.$

Problems

For both years, calculate the current ratio, quick ratio, NWC$,$ and WCR$.$ Interpret the values for the

current year. Also, discuss the observed two$-$year trend in solvency.

For both years, calculate the CCC $($and its components$),$ the NLB$,$ and DCH$.$ Interpret the values for the

current year. Also, discuss the observed two$-$year trend in liquidity.

Suppose that a creditor stipulates that JWHC must maintain a quick ratio of $1\mathrm{.}50.$ Use the values for cur$-$

rent liabilities in the current year to calculate the required level of cash holdings and accounts receivable.

If the CFO of JWHC wants the firm to target a WCR of $o$,$ then what change in current operating assets

is required $($all else constant$)?$ question $1-4$