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Assessing Short Term Liquidity

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** Please see the attached Excel file for the complete solution **

Working Capital Activity Ratios:
1. Days Inventory Held 73.0 108.2 93.9
2. Days Accounts Receivable Outstanding 0.0 90.2 0.0
3. Days Accounts payable outstanding 43.8 116.5 49.6

Operating Cycle (1 + 2) 73.0 198.4 93.9
Cash Conversion Cycle (1 + 2 -3) 29.2 81.9 44.3
Current Ratio 2.1 0.7 1.3

Required

1. Do any of these companies appear to have a short-term liquidity problem?
2. Which company has the most mismatched cash flow?
3. All three companies are in the same industry. Why is Spiegel the only one with Accounts receivable?

Questions on the data:
1. Do any of these companies appear to have a short-term liquidity problem?
2. Which company has the most mismatched cash flow?
3. All three companies are in the same industry. Why is Spiegel the only one with Accounts receivable?

Thanks for the help.

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Solution Summary

In this solution we analyze a spreadsheet and determine liquidity. The days accounts payable outstanding is determined.

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** Please see the attached file for the complete solution **
The following table reports the operating cycle, cash conversion cycle, and current ratio for three retailers in the apparel business. The GAP built its brand name on basic, casual clothing styles (T-shirts, jeans and khakis). Over the years, the company expanded by opening Banana Republic and Old Navy Stores. Spiegel is a top U.S direct retailer, selling through its namesake catalog and its Eddie Bauer Unit. The Majority of J. ...

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