Mac Tech

Mac Tech is a manufacturer of electronic components and accessories with total assets of
$20 000 000. Selected financial ratios for Mach Tech and the industry averages for the firms of similar size are presented below:
Current ratio
Quick ratio
Inventory turnover
Net sales to net worth
Net income to net worth Total liabilities to net worth
Mac Tech
2016 2017 2018
2.09 2.27 2.51 1.15 1.12 1.19 2.40 2.18 2.02 2.71 2.80 2.99 0.14 0.15 .017 1.41 1.37 1.44
2018 Industry Average
2.24 1.22 3.50 2.85 0.11 0.95
Mac Tech is being reviewed by several entities whose interests vary, and the company’s financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Mac Tech’s financial position.
Stanbic Bank. The bank is processing Mac Tech’s application for a new 5-year term note. Stanbic has been Mac Tech’s banker for several years, but must reevaluate the company’s financial position for each major transaction.
Rajell Company. Rajell is a new supplier to Mac Tech, and must decide on the appropriate credit terms to extend to the company.
Taffins Financials. A brokerage firm specializing in the stock of electronics firms that are sold over-the counter, Taffins Financials must decide if it will include Mac Tech in a new fund being established for sale to Taffins Financials.
Working Capital Management Committee. This is a committee of Mac Tech management personnel chaired by the chief operating officer. This committee is charged with the responsibility of periodically reviewing the company’s working capital position, comparing actual data against budgets, and recommending changes in the strategy as needed.
1. Describe the analytical use of each of the six ratios presented above.
2. For each of the four entities described above, identify two financial ratios, from those presented that would be most valuable as a basis for its decision regarding Mac Tech

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