Relationship between liquidity and accounts receivable

Assignment Help Operation Management

Reference no: EM131639078

Quality Home Health(QHH) has been expanding rapidly over the past five years. Although paper profits(i.e., earnings that are shown on reports but may bot tranlate into actual cash in the bank) have been stable at about 3.5 percent of operating revenues, the liquidity of the company has become a concern. You, the CFO, have noted that days cash on hand has dropped to 12 and that the current ratio has decreased to 0.4, while days in accounts receivable has increased to 122 and inventory turnover has decreased substantially. The CEO would like you to answer the following questions:

1. Why does cash flow and liquidity become a problem during company growth?

2. How can a company have healthy profits but lack funds to pay basic expenses?

3. What is the relationship between liquidity and accounts receivable?

4. What could QHH do to improve its liquidity?

Reference no: EM131639078

Questions Cloud

Advise a memo advising the investors of the tax implications : Please advise a memo advising the investors of the tax implications of issuing additional shares of stock

Evaluating the returns on leadership development : What outcomes should BP collect to determine the effectiveness of the First level leaders development program?

Determine the dollar values of alpha companys goodwill : Use this information to determine the dollar values of Alpha Company's: Goodwill and Total Assets before Consolidation

Eprs decision associated with a production operation : Assume that you are reviewing the EPRS decision associated with a production operation where P=4000 units per year,

Relationship between liquidity and accounts receivable : Why does cash flow and liquidity become a problem during company growth? What is the relationship between liquidity and accounts receivable?

Process improvement help achieve cost savings and efficiency : How does process improvement help achieve cost savings and efficiency

Five types of product flow-continuous process-assembly line : There are five types of product flow: continuous process, assembly line, batch, job shop, and project.

Customer contact matrix : Customer contact matrix a. Provide three examples of three companies that use various degrees of customer/server contact.

Which are known to produce chest infections : Marclusajo owns a factory in which the relevant process produces chemical fumes which are known to produce chest infections.

User Account

All Pages