Using the Ratios and Information Given Below for SportsOutlet

question 17

Essay

Using the ratios and information given below for SportsOutlet.com, analyze the short-term liquidity and operating efficiency of the firm. $\begin{array}{lll}&2015&2014\\\text { Current ratio } & 1.50 & 1.35 \\\text { Quick ratio } & 1.15 & 1.08 \\\text { Cash flow liquidity ratio } & 1.39 & 1.32\\\text { Average collection period } & 10 \text { days } & 7 \text { days } \\\text { Days inventory held } & 35 \text { days } & 28 \text { days } \\\text { Days payable outstanding } & 86 \text { days } & 79 \text { days }\\\text { Cash conversion cycle } & (41 \text { days) } & \text { (44 days) } \\\text { Fixed asset turnover } & 27.36 \text { times } & 22.14 \text { times } \\\text { Total asset tumover } & 1.93 \text { times } & 2.21 \text { times }\\\text { Cash flow from operations (in millions) } & \$ 523 & \$ 376 \\\text { Net sales (in millions) } & \$ 6,743 & \$ 5,187\end{array}$

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Definitions:

Termination Clause

A provision within a contract that specifies the conditions under which the contract may be ended by either party.

Current Service Levels

The existing extent and quality of services provided by an organization or team, prior to any improvements or changes.

Outsourcing Contract

A legal document that outlines the terms and conditions under which a company contracts out parts of its business processes or services to a third-party provider.

Managing Outsourcing

The process of overseeing and coordinating contracts with external organizations to perform certain business functions or tasks.