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Bluestone Metals, Inc., is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm’s motto is “If you need it, we can make it.” The CEO of Bluestone recently held a board meeting during which he extolled the virtues of the corporation. The company, he stated confidently, had the capability to build any product and could do so using a lean manufacturing model. The firm would soon be profitable, claimed the CEO, because the company used state-of-the-art technology to build a variety of products while keeping inventory levels low. As a business press reporter, you have calculated some ratios to analyze the financial health of the firm. Bluestone’s current ratios and quick ratios for the past 6 years are shown in the table below:
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
|
Current ratio |
1.2 |
1.4 |
1.3 |
1.6 |
1.8 |
2.2 |
Quick ratio |
1.1 |
1.3 |
1.2 |
0.8 |
0.6 |
0.4 |
What do you think of the CEO’s claim that the firm is lean and soon to be profitable?
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