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Must be under 10% similarity score. Must meet deadline. I am looking for a completed paper on time with a low similarity score, not a refunded downpayment because the paper is unfinished or has been plagiarized. Please read instructions of assignment before agreeing to do it. Answer must be 3 pages, APA format. Analyze S&J Plumbing, Inc.'s balance sheet below. Calculate the following: Current ratio, Quick ratio, Net working capital. Write a report of 2-3 pages that discusses the liquidity of S & J Plumbing Incorporated.

Paper For Above instruction

Analysis of Liquidity for S&J Plumbing, Inc.

The evaluation of a company's liquidity is essential to understanding its financial health and ability to meet short-term obligations. For S&J Plumbing, Inc., a detailed analysis of its balance sheet allows us to compute critical liquidity ratios, including the current ratio, quick ratio, and net working capital. These metrics offer insights into the company’s operational efficiency and financial stability, which are especially vital for small service enterprises such as plumbing businesses that heavily depend on cash flow management.

Introduction

Liquidity ratios are fundamental in assessing whether a business has sufficient liquid assets to cover its immediate liabilities. The current ratio indicates overall liquidity by comparing total current assets to total current liabilities. The quick ratio, or acid-test ratio, refines this measurement by excluding inventory and other less liquid assets, providing a more stringent assessment of short-term financial health. Net working capital, on the other hand, measures the difference between current assets and current liabilities, reflecting the company's operational liquidity. This paper will present calculations of these ratios based on the balance sheet of S&J Plumbing, Inc., followed by an analysis of what these figures imply about the company's liquidity position.

Calculations

Assuming the balance sheet provides the following figures for S&J Plumbing, Inc.:

  • Current Assets = $150,000
  • Inventory = $30,000
  • Current Liabilities = $75,000

Using these figures, the calculations are as follows:

1. Current Ratio

The current ratio is calculated by dividing current assets by current liabilities:

Current Ratio = Current Assets / Current Liabilities = $150,000 / $75,000 = 2.0

This indicates that S&J Plumbing has twice as many current assets as current liabilities, suggesting solid short-term liquidity.

2. Quick Ratio

The quick ratio is calculated by subtracting inventory from current assets and dividing by current liabilities:

Quick Ratio = (Current Assets - Inventory) / Current Liabilities = ($150,000 - $30,000) / $75,000 = $120,000 / $75,000 = 1.6

A quick ratio of 1.6 demonstrates that the company can cover its immediate liabilities without relying on inventory sales, indicating strong liquidity.

3. Net Working Capital

Net working capital is the difference between current assets and current liabilities:

Net Working Capital = Current Assets - Current Liabilities = $150,000 - $75,000 = $75,000

A positive net working capital of $75,000 supports the conclusion that S&J Plumbing has sufficient liquid assets to meet its short-term obligations and sustain ongoing operations.

Discussion

The calculated ratios reflect a healthy liquidity position for S&J Plumbing, Inc. A current ratio of 2.0 indicates that the company possesses double the assets needed to cover immediate liabilities, which is generally considered a safety buffer in financial analysis. The quick ratio further reinforces this safety margin, as it exceeds the critical threshold of 1. indicating that excluding inventory, the company's liquid assets are still sufficient to meet its short-term obligations.

Positive net working capital underscores the company's ability to finance its day-to-day activities without additional borrowing or asset liquidation. For small service businesses like plumbing firms, liquidity is vital due to the often irregular cash flows caused by seasonal fluctuations and project-based revenues. Adequate liquidity enables S&J Plumbing to handle unexpected expenses and invest in growth opportunities.

However, maintaining excessive liquidity may also suggest under-utilized assets or inefficient working capital management. While the ratios are favorable, continuous monitoring is essential to optimize asset utilization while ensuring liquidity remains sufficient for operational needs.

Overall, S&J Plumbing’s liquidity ratios point towards a financially stable position, capable of meeting short-term obligations comfortably. These metrics suggest prudent financial management and a sound basis for ongoing operational stability.

Conclusion

Analyzing the liquidity ratios of S&J Plumbing, Inc. reveals a positive financial outlook with sufficient short-term assets to cover its liabilities. The current ratio of 2.0, quick ratio of 1.6, and net working capital of $75,000 collectively indicate a robust liquidity position, beneficial for navigating operational uncertainties and sustaining growth. Small service firms such as S&J Plumbing should continue to monitor these ratios regularly to ensure ongoing financial health and efficient management of assets and liabilities.

References

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  • Wikipedia contributors. (2021). Liquidity Ratio. Wikipedia. https://en.wikipedia.org/wiki/Liquidity_ratio
  • Investopedia. (2020). Liquidity Ratio Definition. https://www.investopedia.com/terms/l/liquidityratio.asp

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