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The latest quarterly financial reports for XYZ Company revealed the values for 3 financial ratios: Current Ratio = 0.75 Quick Ratio = 0.6 Equity Ratio
The latest quarterly financial reports for XYZ Company revealed the values for 3 financial ratios: Current Ratio = 0.75 Quick Ratio = 0.6 Equity Ratio = 0.25 In order to improve the firm's financial health based on these three financial ratios, the company's management team has proposed the following 5 strategies for the current quarter. For each strategy, those lines from the Balance Sheet been affected are listed in the parentheses. Strategy 1: Purchase new equipment with cash ('Cash' and 'Equipment) Strategy 2: Purchase new equipment with a 6-month loan ('Short-Term Liabilities' and 'Equipment") Strategy 3: Reduce warehouse inventory level using Just-in-Time mechanism (Inventory') Strategy 4: Payback short-term loans with retained earnings ("Short-Term Liabilities' and 'Retained Earnings') Strategy 5: Raise capital (in cash) by issuing more common shares that will be used to pay for short-term debt ('Cash', 'Short-Term Liabilities', and 'Common Shares) Identify two strategies that will improve all three ratios (Current, Quick and Equity Ratios). Strategy 2 and Strategy 4 o Strategy 4 and Strategy 5 O Strategy 1 and Strategy 5 Strategy 3 and Strategy 4 O Strategy 1 and Strategy 4
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