The new owners of Pak. Electric Co. have hired you to help them diagnose and cure problems that the company has had in maintaining adequate liquidity. As a first step, you perform a liquidity analysis. You then do an analysis of the company’s short-term activity ratios. Your calculations and appropriate industry norms are listed.RatiosCurrent RatioPak. Electric Co. 4.5Industry Average 4.0Quick RatioPak. Electric Co. 2.0Industry Average 3.1Inventory TurnoverPak. Electric Co. 6.0Industry Average 10.4Average Collection PeriodPak. Electric Co. 73 daysIndustry Average 52 daysAverage Payment PeriodPak. Electric Co. 31 days40 daysa. What recommendations relative to the amount and the handling of inventory could you make to the new owners?b. What recommendations relative to the amount and the handling of accounts receivable could you make to the new owners?
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