The Ace Company's Creditworthiness

Accounts Receivable Trends

Ace's accounts receivable increased by $100,000 between 2018 and 2019. Customers are paying their amounts in greater numbers, as evidenced by the growth. The principal cause of the rising trend in accounts receivables, as reflected by the Company's receivable turnover ratio, is sales on credit accounts. In a logical sense, the accounts receivable ratio criticizes how well a company receives payments from customers. Receivables are the actual amount that clients owe the Company, according to Kozarevic et al. (2019), when they buy things and service them on credit. The accounts receivable turnover ratio is calculated statistically by dividing the net sales for the reporting period by the actual average of the accounts receivables' beginning and ending balances for that period. Accounts receivable is what decides how much money you have.

Inventory to Sales Ratio

The inventory ratio, according to Kumar et al. (2018), defines the actual pace at which a company sells and eventually replaces the exact sold products over a set period. The inventory ratio is used to determine how long it takes a corporation to sell items throughout a reporting period. The inventory balance is determined by dividing the actual costs of products sold during a certain period by the average inventory costs. Furthermore, the average time a product can be in stock is shown when the reporting days are divided by the ratio. RSC service fill rates of 96.2 in 2017 and 96.3 in 2019 show an improvement in turnover (Ace & Company, 2020). For 2019 and 2018, inventory turnover was 1.83 and 1.94, respectively.

Worthiness of Credit

Understanding how the Ace corporation handled debt in the past is critical to comprehending the company's creditworthiness. The current ratios in 2018 and 2019 are 1.54 and 1.81, respectively. Ace Company has greatly improved in paying short-term expenses or liabilities with current assets, as evidenced by the recent ratio growth. Furthermore, based on the information supplied, it is clear that the Organization's total debt to equity ratio has fallen significantly from 3.78 to 2.49 times in 2018 and 2019, respectively. Ace Company owes its creditors less in this case. Similarly, the Company's interest grew from 8 times in 2018 to 10.2 times in 2019. As a result, rising interest rates indicate that the company is on the right track to success. The ace group is improving its ability to repay interest payments.

Recommendation

Overall, after carefully studying Ace Company's financial statistics, I am convinced that we can request and handle their $3 million ten-year loan witloansnfidence. Because it has fewer present liabilities and debts, the Company has demonstrated its creditworthiness. Furthermore, Ace has demonstrated an increase in the receivable inventory turnover rate as well as overall development in terms of net income and total assets. The decline in Ace's inventory turnover rate is the source of discontent. However, it cannot be a major problem because the company constantly generates large revenue, implying that it is making good use of its excess inventory. As a result, Ace Corporation has demonstrated its creditworthiness, and the loan lender should have faith in its ability to repay the debt. Ace Company's accounts receivable climbed by $100,000 between fiscal years 2016 and 2017, indicating that more consumers are still paying on credit. The company solely sells on credit accounts, which is reflected in its accounts receivable turnover ratio, which is one element that could be the cause of the year-over-year growth in accounts receivable. The accounts receivable turnover ratio indicates how successful a company is at collecting money from customers who made credit purchases.

E. Kozarevic, A. Delic, and M. Omerovic (2019). The role of credit sales and receivables control in Tuzla Cant, on, Bosnia and Herzegovina's wood processing firms. 93-103 in the International Journal of Industrial Engineering and Management (IJIEM).

D. S. L. Kumar, S. Nallusamy, and V. Ramakrishnan (2018). Proposed inventory management model to increase textile industry supply chain efficiency and surplus.