Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the two most recent years.
Liquidity Ratios Refer to the information for Kepler Company on the previous page.
1. Compute the following ratios for each year: (a) current ratio, (b) quick ratio, (c) receivables turnover (in days), and (d) inventory turnover (in days).
2. Conceptual Connection: Has the liquidity of Kepler improved over the past year? Explain why industrial liquidity performance would be useful information in assessing Kepler’s liquidity performance.