liquidity of a company, Financial Management

Eco Tyre Ltd. (ETL) - incorporated in year 2003 and entered into automobile tyre manufacturing business by introducing a new tire manufacturing technology. Over the years, ETL has been recognized as a tyre market leader. But, now a day, ETL is facing hard time due ineffective control of its working capital items.

Following data has been developed from its comparative balance sheets:

Ratio FY 2010 FY 2011
Current Ratio 0.60 Times 0.79 Times
Quick Ratio 0.45 Times 0.61 Times
Return on Asset 9.7% 12.5%
Inventory Turnover 28 Times 15 Times
Avg. Collection Period 13 Days 24 Days
Short-term Debt 4 million 4 million
Total Asset Turnover Ratio 2 Times 5 Times
Credit Sales to Cash Sales Ratio 0.45 Times 0.67 Times

Being a financial analyst, do you think the liquidity of a company is satisfactory?
Support your answer with logical reasoning.

Posted Date: 10/23/2012 1:55:12 PM | Location : United States

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