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Case Study Linda Berhad Case Analysis

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Bill is concerned about the inventory and account receivables turnover ratios because of their purpose and meaning in converting the situation of the business into figures. Inventory turnover ratio is to measures how efficient a business is at managing their inventory and generating sales from it, the formula for the ratio is (Cost of Good Sold)/(Average Inventory). From the statement, Linda Berhad initially had 5.1 turnover ratio where 1/5.1 ×365 days=71.57 days, this indicates that Bob initially only used approximate 72 days to clear off his entire inventory. Meanwhile, Bill had noticed that the ratio had decreased to 2.7 where it took about 136 days (1/2.7 ×365 days=135.19 days) for Linda Berhad to clear off their entire inventory. This means Linda Berhad are having a tough time to sell off their goods which is true as Bob said their computers were unable to sell during the holiday season. An increase in days for a company to completely clear off their stock is not a good sign as the quality of the inventories might go down or outdated. In the case of Linda Berhad, their products which is computers, if the inventory take a longer time to clear off, then their products might be unable to sell in the future as technology products like computer keep evolving from time to …show more content…

From the statement, Linda Berhad ratio had drop from 11 to 7.1 which also indicates that they initially only took about 34 days (1/11 ×365 days=33.18 days) to collect receive cash from debtors for each credit sales. However, the days for receive cash had been increase due to its decrease of ratio to 7.1 where it took about 52 days (1/7.1 ×365 days=51.41 days) for them to collect cash from debtors for their current

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