Reference no: EM133715657

Question: When compared to industry averages, the financial data provided for C&C sports shows that the company is not maintaining enough liquidity to cover their current liabilities and financial obligations. This will make them be viewed by potential creditors as risky and can lead to the potential denial of any credit lines to expand their business. To improve their standing with potential creditors, they can pay their current obligations, and improve their profitability ratio by selling off or reducing unnecessary liabilities. C&C sports' inventory turnover ratio is comparable to the industry averages, meaning the leadership team is doing well with managing the inventory. This is evident through the fact that "in 2019, 74.34 cents of every dollar in sales revenue was used to cover the cost of C&C's products. In 2020, slightly less than that amount (74.06 cents) was used to cover the cost of production, so C&C has reduced its cost to produce as a percentage of sales." This was done through adjusting pricing or better controlling their costs. Their debt-to-equity ratio indicates a continued need for increasing prices or further adjustment of costs. A proper increase in price would improve the dollar amount of revenue received per item but too far and it would reduce the overall sales revenue as consumers would look for a cheaper alternative. At this point, the better option is introducing a lower-priced version of the products to give them revenue coming from both options. This would increase revenue and profitability through increasing sales at both levels with lower manufacturing costs on the entry level products. One example of companies that do this often are that of car companies offering multiple models of cars at varying price points.