solve it plz (a) the manger of kim possible has approached you to invest $20,000

Question

solve it plz

(a) the manger of kim possible has approached you to invest $20,000 in the company. do you feel comfortable with making the investment? discuss (about 4-5 lines)

(b) if were a trade supplier would you provide kim possible toys Lid $5,000 line of credit ? Discuss (about 3-4lines)

the manger of kim possible has approached you to invest $20,000 in the company. do you feel comfortable with making the investment? discuss (about 4-5 lines) if were a trade supplier would you provide kim possible toys Lid $5,000 line of credit ? Discuss (about 3-4lines)

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

No, I would feel not comformtable in making the inevstment. The main reason for this decision would a decline in EPS (from 2.6 to 1.8) which is less than the industry average of 3.5. Further, other profitability (gross and net margin) and turnover ratios (accounts receivable and inventory turnover) indicate an overall downward performance by the company.

Part B:

Yes, I would have provided possible toys with 5000 line of credit on the basis of its current and quick ratio. Both these rations indicate a company's ability to meet its short term obligation A current ratio of 1.85 and a quick ratio of 1.01 indicate that a company has suffiicient cash to meet its short term obligations.

Thanks.

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