Reed's Clothier, Inc. – Case Study

999 words - 4 pages

Founded in 1934, Reed's Clothier and its owner Jim Reed II, is faced with loosing financing. The company has ample inventory, however, is strapped for cash as a 30 day deadline to pay a bank note for $130,000 approaches with only $85,000 in reserves. In order to meet his pending and future financial obligations, Mr. Reed must convert a portion of his $491,000 inventory into cash.1. Calculate a few ratios and compare Reed's results with industry averages.What do these ratios indicate?Reed's ClothiersIndustryLiquidity RatiosCurrent Ratios 2.022.7Quick Ratios0.941.6Receivable Turnover4.97.7Average Collection Turnover74.147.4Efficiency RatiosTotal Asset Turnover1.31.9Inventory Turnover2.97.0Payable Turnover7.015.1Profitability RatiosGross Profit Margin3033.0Net Profit Margin57.8Return on Common Equity1625.9Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas.Ratio analysis is primarily used to compare a company's financial figures over a period of time, a method sometimes called trend analysis. Through trend analysis, you can identify trends, good and bad, and adjust your business practices accordingly. You can also see how your ratios stack up against other businesses, both in and out of your industry.There are several considerations you must be aware of when comparing ratios from one financial period to another or when comparing the financial ratios of two or more companies.In comparing the financial ratios of Reed's Clothiers to the averages of others in the same industry, it readily becomes clear that Jim's preference of keeping a large inventory of clothing on hand was definitely having a negative impact on his business.Reed's Clothiers inventory turnover ratio of 2.9 is extremely low in comparison to the industry average of 7.0. Also Reed's Clothiers quick ratio is drastically under the industry average.There are also similar problems with Reed's Clothiers receivables turnover and average collection period. The low receivables turnover ratio of 4.9 is an indication of the firm's inability to collect on its accounts receivables.Reed's average collection period of 74.1 days as apposed to the industry average of 47.4 days, indicates that Jim should adjust his credit collection policy for more strict guidelines. In looking at the company's extremely low 7.0 payable turnover ratio, and an industry standard of 15.1, is clear indication that the firm is struggling to repay its debts to its creditors.2. Why does Holmes want Reed's to have an inventory reduction sale, and what does he think will be accomplished by it?The large inventory, even though it has increased the firm's asset base, will not generate revenue until it is sold. Having an inventory reduction...

Find Another Essay On Reed's Clothier, Inc. – Case Study

ABC, Inc. Case Study Analysis

1012 words - 4 pages ABC, Inc. Case Study Analysis Problem At the beginning of April, Carl Robbins was hired at ABC, INC. as a new recruiter. He successfully hired several employees, even though he was fairly new at his job. This was his first recruitment effort that turned out quite well. After this, the Operations Supervisor, Monica Carrolls, tasked Carl to recruit 15 new employees to begin working at ABC in July. So Carl scheduled an orientation to take

Case Study Analysis ABC Inc

1113 words - 4 pages policy booklets would be in place by the June 15 deadline. Mr. Robins however, has failed or neglected to ensure that necessary arrangements were taken before the June 15 new hire orientation. Mr. Robins also failed or neglected to follow up with all pre-requisites before the new hires could begin orientation. The goal of this case study is to look at ways Mr. Robins could have conducted his work habits better and find resolutions to the problems

White Castle Systems Inc. Case Study

1372 words - 5 pages . (2005). Marketing, [University of Phoenix Custom Edition e-text]. New York: The McGraw Hill Companies. Retrieved January 9, 2007 from the University of Phoenix, Resource MKT/551, Marketing Management https://ecampus.phoenix.edu/secure/resource/resource.asp.University of Phoenix. (2007). Case Study 6 White Castle Systems Inc., Retrieved January 24, 2007 from the University of Phoenix resource page for MKT-551, Marketing Management https

Case Study Analyses: The Gap, Inc

1658 words - 7 pages The central purpose of writing this Case Study Analyses on The Gap, Inc. is to identify and isolate key issues and their underlying implications and offer practical solutions and plans for implementing those solutions. This will be done by highlighting the social influences that influence the Gap, Inc. marketing strategy, segmentation strategies with respect to distinct retail markets, and positioning strategies that can be used or changed

Blades, Inc. Case Study Analysis Paper

995 words - 4 pages Blades, Inc. Case Study Analysis PaperFactors of Foreign Exchange RatesExchange rates are the amount of one country's currency needed to purchase one unit of another currency and the foreign exchange market is the monetary nexus between countries that makes it possible for global trade to be accomplished more efficiently than barter. The foreign exchange market is where one countries' currency is exchanged for another because each nation uses

Krispy Kreme Doughnuts Inc Case Study

1130 words - 5 pages Krispy Kreme Doughnuts Inc Case Study Summary In this SWOT analysis, I will delve into the strengths, weaknesses, opportunities, and threats that affect the Krispy Kreme Doughnuts Inc. Krispy Kreme is a highly successful company, whose main product, not surprisingly, is doughnuts. The company went public in 2000, and saw a hugely successful increase in share price immediately after. Vernon Rudolph founded the Krispy Kreme company in 1937

Case Study: Rocky Mountain Advanced Genome Inc

1996 words - 8 pages Case Study: Rocky Mountain Advanced Genome Inc In order to provide an accurate valuation of RMAG, the forecast horizon needs to reach the maturity stage the firm’s growth. The product that will take the longest to be marketed, Human Therapeutics is not expected to be earning revenues for RMAG for 4-7 years therefore to allow these products to reach their maturity in generating cash flows, a horizon for longer than 10 years is recommended

Case Study of Apple Inc and its Success

1194 words - 5 pages Apple Inc. has been into the electronics business since some decades in the industry. It had built its place in the markets, all over the world through its dynamic strategies that focused on quality and innovation. Apple Inc. has made progress from being a loss making company to being the biggest company in the electronics industry with incredibly high revenues and profit margins. The assignment is going to be based upon Apple Inc.'s case study

Case Study: Caterpillar Inc

1289 words - 5 pages and Thailand mounted our in-house developed "ecot3" Tier 3-compliant engines on 21 models, including the new PC200-8 hydraulic excavator." (2008) The Company is meeting emission standards and encroaching on Caterpillar's territory. It is hard to compare Caterpillar to the rest, as the company is superior to the competition, Period. 6. Where are the major growth opportunities for Caterpillar, Inc. in the international market? Identify the

Apple, Inc. Case Study

1711 words - 7 pages Brief Overview of Apple Apple, Inc. was formed by Steven Jobs and Steven Wozniak in 1976 (Mrak-Blumberg, Renery & Bundgaard, 2006). Both had developed interest in electronics in their high school years, and upon graduation, found themselves working for major companies. Jobs worked for Atari, while Wozniak was employed by Hewlett-Packard. Wozniak designed the first Apple computer named Apple 1, which made its debut in 1976 but like most new

AucScan, Inc. Case Study

1860 words - 7 pages AcuScan, Inc. Case StudyI am newly hired Vice President of Organizational Development, and will be responsible for creating the Organizational Development department over the coming year. This company is trying to find a new product based on their technology, a retinal scanning system, because revenues have been dropping. Two members of the management team have suggested a new product for a new market, but the manager of Product Development has

Similar Essays

Reed's Clothier Case Study

1097 words - 4 pages IntroductionJim Reed II, owner of Reed's Clothier, is facing financial troubles. Reed is facing a potential loss of financing by the First Virginia National Bank. A 30-day deadline is closing in on a $130,000 bank note. Reed has $85,000 cash in reserves and $491,000 in inventory. To meet the financial obligations of the business, Reed must convert a portion of the inventory into cash. Financial ratio analysis will be provided to assess the past

Reed's Clothier Case Study Business Finance

881 words - 4 pages Untitled Reed's Clothier Reed's Clothier started in 1934 and the owner, Jim Reed, is possibly going to loose financing for his company. His company has a considerable amount of inventory; however, the problem is that Jim needs cash as one of his loans is approaching fast. The loan is for $130,000 and has a 30 day deadline, but Jim only has $85,000 in reserve. Jim now needs to turn some of his $491,000 inventory over into cash

Abc Inc Case Study

1028 words - 4 pages of the root causes for ABC, Inc. However, most importantly, procrastination, operational knowledge and follow through of his duties appear to be the primary culprit.ReferencesUniversity of Phoenix. (2006) Week Two supplement, Case Study for Student Analysis. Retrieved November 5, 2006, from University of Phoenix, Week Two, rEsource. COMM215 â€" Essential of College Writing.University of Phoenix. (2006) Week Two supplement, Sample Short Report Case Study Format. Retrieved November 5, 2006, from University of Phoenix, Week Two, rEsource. COMM215 â€" Essential of College Writing.

Abc, Inc. Case Study Analysis

518 words - 2 pages  ABC, Inc. Case Study Analysis •     Introduction A number of problems were made during the recent hiring process. This case Study is an attempt to identify and recommend ways to improve this process. From the information that has been obtained, I believe that a lack of employee experience and a lack of prior planning and follow up resulted in a failure to accomplish all the tasks necessary to hire the new employees in a