Question

You have been hired as an analyst for Bank WA and your team is working on an independent assessment of a firm that specializes in the production of freshly imported farm products from New Zealand. Your assistant has provided you with the following data about the company and its industry.

Ratio	2019	2018	2017	2019- Industry Average
Long-term debt	0.45	0.40	0.35	0.35
Inventory Turnover	62.65	42.42	32.25	53.25
Depreciation/Total Assets	0.25	0.014	0.018	0.015
Days’ sales in receivables	113	98	94	130.25
Debt to Equity	0.75	0.85	0.90	0.88
Profit Margin	0.082	0.07	0.06	0.12
Total Asset Turnover	0.54	0.65	0.70	0.40
Quick Ratio	1.028	1.03	1.029	1.031
Current Ratio	1.33	1.21	1.15	1.25
Interest coverage Ratio	0.9	4.375	4.45	4.65

Q) If current liabilities of the company was 2.5 million in 2019 and daily cash expenditure was 0.011million, using the data provided in the table, calculate the defensive interval ratio.          

Answer 1

Interval Cash + secusities & Receivables. Defensive Ratio Daily cash Expenditure. Given, Quick ratio = 1.028 current liabilites = 2.5 million Daily Cash Expenditure = o.ol1 million Quick ratio - Cash of securities of Receivables Current liabilities 1.028 = Cash & securities + Receivables 2.5 millions Cash & Securities at Receivables es - 2.57 millions. = 2.57 Defensive Interval ratio 2.57 million 0.011 million 233.636 = 234 days (Rounded off)

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