Tybee Liquidity Anaylsis

Antoinette Hammond

Liquidity Evaluation of Avon

Timothy Cairney

February 22, 2015

Avon Liquidity Evaluation

The intention when evaluating the liquidity of Avon was to determine how the company compared to its competitors during the fiscal years of 2000 to 2013. When evaluating the liquidity of the company Avon, we looked at the total current assets and total current liabilities from 2000 to 2013. Below are the numbers that were given from using the Wharten Research Data Services (WRDS) that provided access to the Computstat database using 3-digit NAICS code 32500-32600 for Avon. WRDS is web-based business data research service that gains information from business research databases such as COMPUSTAT, IBES, and others. Because of this service is the reason why WRDS was chosen to acquire the financial accounting data necessary to make the liquidity evaluation.

From acquiring the total current assets and total current liabilities, we derived the current ratio by dividing the current total liabilities into the total current assets. This yielded ratios that were all higher than 1.0 showing positive working capital for the company Avon during the years of 2000-2013.

By graphing the annual average of the company Avon’s annual current ratios and comparing them to the annual averages of the competitors current ratios, we see that Avon’s working capital is significantly lower than its’ competitors, yet it is still positive. We can also deduce from the graph that because of the excessively high average annual current ratio for the competitors, that there is inefficient asset use. Overall, we see that the company Avon has a positive working capital and a good measure of liquidity.