Explore BrainMass
Share

Explore BrainMass

    Calculate a few ratios and compare Reed's results with indus

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    QUESTIONS
    1. Calculate a few ratios and compare Reed's results with industry averages.
    (Some industry averages are shown in Exhibit 4.) What do these ratios indicate?
    2. Why does Holmes want Reed's to have an inventory reduction sale, and
    what does he think will be accomplished by it?
    3. Jim Reed had adopted a very loose working capital policy with higher
    current assets than industry averages. If he merely tightens his working
    capital policy to the averages, should this affect his sales?
    4. Assuming that Reed's can improve its operations to be in line with the industry
    averages, construct a 1995 pro forma income statement. Assume that net
    sales will be reduced 5 percent to $1,938,000 but that depreciation and amortization
    will not change but remain at $32,000.
    5. What type of inventory control system would you suggest to Jim Reed?
    6. What type of accounts receivable control would you suggest to Jim Reed?
    7. Is the increase in sales related to the increase in inventory? (See Exhibit 5.)
    8. What is Reed's cost of not taking the suppliers' discounts?

    © BrainMass Inc. brainmass.com April 1, 2020, 4:19 pm ad1c9bdddf
    https://brainmass.com/business/finance/calculate-a-few-ratios-and-compare-reed-s-results-with-indus-240307

    Attachments

    Solution Summary

    This solution is comprised of a detailed explanation to calculate a few ratios and compare Reed's results with industry averages.

    $2.19