Question

Please check on the following information from Mcdonalds and Wendy's

1. Liquidity
   • Current ratio
   • Quick ratio
   • Comments on liquidity
2. Asset management
   • Total Asset turnover
   • Average collection period (ACP)
   • Comments on asset management

Answer 1

Under Liquidity

Current ratio = Current assests

Current liabilities

Quick Ratio = Current assets - Inventory

Current liabilities

If the ratio is low then the company is facing difficult to pay the short term obgligations. Liquidity ratio measures that how fastly the assets can be turned into cash.

under Assets Management

Total Asset turnover = Net sales   

Average total assets

Higher the ratio , more favourable the management is.As the assets is efficiently used to generate the sales.

Investors and the creditors of the company gets an idea how well the assets is managed to generate the higher sales.

Average collection period = difference between date of credit sale to the date of purchases for that sale

lower collection period is more favourable as it denotes the faster collection  of payment.

Comments on asset management:

The company is said to be efficient managed if the assets turnover ratio is higher and the average collection period is lower.