QUESTION 14 Use the following information for Ace Retailers to answer the questi

Question

QUESTION 14 Use the following information for Ace Retailers to answer the question 2015 Financial ratios for the years ended May 31, 2016 Liquidity Current (times) Quick (times) 1.57 1127 1.45 1.45 1.22 1.43 Cash flow liquidity (times) Average collection period Days inventory held Days payable outstanding Cash conversion cycle Activity Fixed asset turnover Total asset turnover Other information Cash flow from operations (in millions of S) Revenues (in millions of S) 11 days9 days 33 days 79 days 27 75 days (35) days(39) days 28.12 times 23.47 times 2.13 times 2.43 times 5567 S392 S6,921 $5,264 A concern that an analyst would have when analyzing the liquidity of Ace Retailers is that: 0 the company has negative cash flows from operations. O the firm may be taking too long to pay suppliers. the company appears to sell inventory too quickly the quick ratio is less than the current ratio.

Explanation / Answer

Answer is :

the quick ratio is less than the current ratio

The quick ratio for the year 2015 is 1.22 times and current ratio for the year 2015 is 1.45 times. We can see that quick ratio is lower than current ratio for the year 2015.

The quick ratio for the year 2016 is 1.27 times and current ratio for the year 2015 is 1.57 times. We can see that quick ratio is lower than current ratio for the year 2016.

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