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Black Sparrow Aviation, Inc. is concerned they are not maintaining adequate liquidity. The accounting department has provided you, the newly hired finance manager, with the following ratios:
Current ratio 4.5 Industry norm 4.0
Quick ratio 2.0 Industry norm 3.1
Inventory turnover 6.0 Industry norm 10.4
Average collection period 73 days Industry norm 52 days
Average payment period 31 days Industry norm 40 days
In your opinion, what do these ratios indicate about Black Sparrow Aviation, Inc.?
What recommendations would you make based on these ratios? What results do you think you can achieve if your recommendations are followed? Why might your recommendations not be effective?
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