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Liquidity management Bauman Company's total current assets

Liquidity management Bauman Company's total current assets, net working capital, and inventory for each of the past four years follow:

Item 2005 2006 2007 2008
Total current assets $16,950 $17,450 $18,230 $20,165
Net working capital 7,950 8,760 9,765 12,035
Inventory 7,000 8,150 9,600 8,130

a. Calculate the firm's current and quick ratios for each year. Compare the resulting time series of each measure of liquidity.
b. Comment on the firm's liquidity over the 2005-2008 period.
c. If you were told that Bauman Company's average age of inventory for each year in the 2005-2008 period and the industry averages were as follows, would this support or conflict with your evaluation in part b?explain.

Average age of inventory (in days) 2005 2006 2007 2008
Bauman Company 52.1 53.7 57.9 61.4
Industry average 34.4 32.6 33.8 33.2

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Solution Summary

The liquidity management for Bauman Company's total current assets is examined.

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