The following ratios were extracted from the books of Cartel limited.
Liquidity ratios
2002
2003
2004
Industry Average
Current Ratio
2.33
1.46
2.58
2.70
Quick Ratio
0.85
0.50
0.93
1.00
i) What can you say about the company's liquidity position in 2002, 2003, and as projected for 2004?
ii) How are these liquidity ratios useful to the managers of the company?
b) Asset management ratios (Inventory turnover, days sales outstanding , fixed assets turnover, operating capital requirement, and total assets turnover)
Asset Management ratios
Inventory Turnover
4.80
4.53
4.10
6.10
Days Sales Outstanding
37.4
39.5
45.5
32.00
Fixed Asset Turnover
9.95
6.21
8.41
7.00
Total Asset Turnover
2.34
2.02
2.00
2.50
How does Cartel Limited’s utilization of assets stack up against other firms in its industry?
c) Debt management ratios (debt, times-interest-earned, and EBITDA coverage ratios).
Debt Management ratios
Debt Ratio
54.8%
80.7%
43.8%
50.0%
Times Interest Earned
3.35
0.10
6.28
6.20
EBITDA Coverage Ratio
2.61
0.81
5.52
8.00
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