Problem: Analysts maintain that two of the most important ratios are inventory turnover and accounts receivable turnover.
1. You are analyzing 2112 Company, a guitar manufacturer. You notice that inventory turnover this year is significantly lower than prior years. Provide two explanations that would be consistent with this observation. Explain whether each of these would be a good sign or if each would be a concern to you and what the effect might be on the next period's financial results.
2. You are analyzing 2112 Company, a guitar manufacturer. You notice that accounts receivable turnover this year is significantly lower than prior years. Provide two explanations that would be consistent with this observation. Explain whether each of these would be a good sign or if each would be a concern to you and what the effect might be on the next period's financial results.