Posted on

Reed Clothier Case Study and Assignments_Complete_Answer

Reed Clothier Case Study and Assignments_Complete_Answer

Reed Clothier Case Study and Assignments_Complete_Answer

Reed Clothier Case Study and Assignments_Complete_Answer

Reed Clothier Case Study and Assignments_Complete_Answer

Question. Briefly summarize the case.
In order to increase sales, Reeds Clothier tried to increase inventory. They were concerned that lower inventory level will lead to reduced sales. Company renovated and redesigned the stores and also tripled carrying the inventory. But increase in sale did not happen as they forecasted. While they tripled the inventory, sales doubled only. This resulted in excess inventory. Money was stuck up in inventory. Instead of analyzing the problem and addressing the root cause, company considered it as cash problem and tried to solve the problem by having progressively larger line of credit. But increasing the line of credit could not solve the problem. When banks demanded payment, severity of the issue came to the attention of the owners of Reeds Clothier. Now they are trying to analyzing financial problem and finding solution.
Question. Calculate a few ratios and compare Reed’s results with industry averages. (Some industry averages are shown in Exhibit 4.) What do these ratios indicate?

Q. Why does Holmes want Reed’s to have an inventory reduction sale, and what does he think will be accomplished by it?

Q. Jim Reed had adopted a very loose working capital policy with higher current assets than industry averages. If he merely tightens his working capital policy to the averages, should this effect his sales?

Q. Assuming that Reed’s can improve its operations to be in line with the industry averages, construct a 1995 pro forma income statement. Assume that net sales will be reduced 5 percent to $1,938,000 but that depreciation and amortization will not change but remain at $32,000.

Q. What type of inventory control system would you suggest to Jim Reed?

Q. What type of accounts receivable control would you suggest to Jim Reed?

Q. Is the increase in sales related to the increase in inventory?

Q. What is Reed’s cost of not taking the supplier?

For instant digital download of the above solution or tutorial, Please click on the “PURCHASE” link below to get the tutorial for Reed Clothier Case Study and Assignments_Complete_Answer

For instant digital download of the above solution or tutorial, please click on the below link and make an instant purchase. You will be guided to the PAYPAL Standard payment page wherein you can pay and you will receive an email immediately with a download link.

In case you find any problem in getting the download link or downloading the tutorial, please send us an email on mail@genietutorial.com