Question 3 [15 marks]

Vee-Jay Company (Pty) Ltd Extracted the following Ratios from its books for the year 2020 together with the relevant industry averages.

RATIOS
		2020			Industry average
1. Current Ratio		1,9			2
2. Acid test ratio		0,8			1
3. Inventory Turnover		4 times			6 times
4. Debtors collection period (days)		51 days			40 days
5 Creditors payment period (days)				61 days		50 days

Required:

1.For each of the above five ratios, answer the following:

a. what does the ratio measure and (8 marks)

state whether there is an improvement or decline in the ratio in comparison with

the industry average (2,5 marks)

2. Comment on the companys overall liquidity position in comparison with industry

( 3,5 marks)