Interpreting liquidity and activity ratios The table, shows key financial data for three firms that compete in the consumer products market: Procter & Gamble, Colgate-Palmolive, and Clorox. a. Calculate each of the following ratios for all three companies: current ratio, quick ratio, inventory turnover, average collection period, total asset turnover. b. What company is in the position of having greatest liquidity? c. Would you say that the three companies exhibit similar performance or quite different performance in terms of collecting receivables? Why do you think that might be? d. Which company has the most rapid inventory turnover? Which company appears to be least efficient in terms of total asset turnover? Are your answers to those questions a little surprising? If a company is best at inventory turnover and worst at total asset turnover, what do you think that means? a. For the three companies, the current ratios are: (Round to three decimal places.) Procter and Gamble Colgate-Palmolive Current ratio Clorox Data table Sales Cost of goods sold Receivable Inventory Procter & Gamble $65,238 32.965 4,737 4,790 25,583 117,038 28,892 Total current assets Total assets Total current liabilities (Note: All dollar values are in thousands.) Done Colgate-Palmolive $15,192 6.067 1,410 1,169 4,342 12,124 3.304 Clorox $5,875 3,239 506 506 1,559 4,573 2,048 X
Interpreting liquidity and activity ratios The table, shows key financial data for three firms that compete in the consumer products market: Procter & Gamble, Colgate-Palmolive, and Clorox. a. Calculate each of the following ratios for all three companies: current ratio, quick ratio, inventory turnover, average collection period, total asset turnover. b. What company is in the position of having greatest liquidity? c. Would you say that the three companies exhibit similar performance or quite different performance in terms of collecting receivables? Why do you think that might be? d. Which company has the most rapid inventory turnover? Which company appears to be least efficient in terms of total asset turnover? Are your answers to those questions a little surprising? If a company is best at inventory turnover and worst at total asset turnover, what do you think that means? a. For the three companies, the current ratios are: (Round to three decimal places.) Procter and Gamble Colgate-Palmolive Current ratio Clorox Data table Sales Cost of goods sold Receivable Inventory Procter & Gamble $65,238 32.965 4,737 4,790 25,583 117,038 28,892 Total current assets Total assets Total current liabilities (Note: All dollar values are in thousands.) Done Colgate-Palmolive $15,192 6.067 1,410 1,169 4,342 12,124 3.304 Clorox $5,875 3,239 506 506 1,559 4,573 2,048 X
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 10P
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Transcribed Image Text:Interpreting liquidity and activity ratios The table, shows key financial data for three firms that compete in the consumer products market: Procter & Gamble, Colgate-Palmolive, and Clorox.
a. Calculate each of the following ratios for all three companies: current ratio, quick ratio, inventory turnover, average collection period, total asset turnover.
b. What company is in the position of having greatest liquidity?
c. Would you say that the three companies exhibit similar performance or quite different performance in terms of collecting receivables? Why do you think that might be?
d. Which company has the most rapid inventory turnover? Which company appears to be least efficient in terms of total asset turnover? Are your answers to those questions a little surprising? If a company is best at inventory turnover and worst at total asset turnover, what do
you think that means?
a. For the three companies, the current ratios are: (Round to three decimal places.)
Colgate-Palmolive
Current ratio
Procter and Gamble
Clorox
Data table
Sales
Cost of goods sold
Receivable
Inventory
Procter & Gamble
$65.238
32,965
4,737
4,790
Total current assets
Total assets
Total current liabilities
(Note: All dollar values are in thousands.)
25,583
117.038
28,892
Done
Colgate-Palmolive
$15,192
6,067
1,410
1,169
4.342
12,124
3,304
Clorox
$5,875
3,239
506
506
1,559
4,573
2,048
X
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