A friend of yours has the opportunity to invest in a small
Question and Solution
A friend of yours has the opportunity to invest in a small business. She has come to you for advice on how she might determine whether this would be a good investment. In particular, she is concerned about how long it takes to sell the merchandise and collect receivables. Draft a memo suggesting various ratios that should be computed to evaluate the business’s profitability, ability to pay its current obligations, and time required to sell inventory and collect receivables.