Briefly analyze the ratios, then Construct only a list of strengths and a list w
ID: 2814566 • Letter: B
Question
Briefly analyze the ratios, then Construct only a list of strengths and a list weaknesses.
Gallery of Dreams
Ratios
Ratio
Industry
2015
2014
2013
Current
2.50x
4.48x
4.06x
3.48x
Quick
0.80x
1.47x
1.18x
0.96x
Average collection period
11 days
16 days
15 days
9 days
Inventory turnover
2.30x
1.19x
1.24x
1.37x
Days payable outstanding
15 days
11 days
12 days
8 days
Fixed asset turnover
17.50x
9.74x
9.09x
8.85x
Total asset turnover
2.80x
1.50x
1.67x
1.82x
Debt ratio
62.00%
29.47%
34.04%
39.17%
Long term debt to
total capitalization
25.53%
14.09%
18.91%
22.33%
Times interest earned
9.93x
22.02x
19.00x
14.23x
Fixed charge coverage
8.69x
4.59x
4.47x
4.25x
Gross profit margin
31.10%
59.21%
59.39%
58.52%
Operating profit margin
8.06%
22.05%
21.86%
20.52%
Net profit margin
4.32%
11.89%
11.00%
10.97%
Return on investment
9.21%
17.97%
18.28%
18.35%
Return on equity
11.34%
24.14%
27.51%
29.88%
Gallery of Dreams
Ratios
Ratio
Industry
2015
2014
2013
Current
2.50x
4.48x
4.06x
3.48x
Quick
0.80x
1.47x
1.18x
0.96x
Average collection period
11 days
16 days
15 days
9 days
Inventory turnover
2.30x
1.19x
1.24x
1.37x
Days payable outstanding
15 days
11 days
12 days
8 days
Fixed asset turnover
17.50x
9.74x
9.09x
8.85x
Total asset turnover
2.80x
1.50x
1.67x
1.82x
Debt ratio
62.00%
29.47%
34.04%
39.17%
Long term debt to
total capitalization
25.53%
14.09%
18.91%
22.33%
Times interest earned
9.93x
22.02x
19.00x
14.23x
Fixed charge coverage
8.69x
4.59x
4.47x
4.25x
Gross profit margin
31.10%
59.21%
59.39%
58.52%
Operating profit margin
8.06%
22.05%
21.86%
20.52%
Net profit margin
4.32%
11.89%
11.00%
10.97%
Return on investment
9.21%
17.97%
18.28%
18.35%
Return on equity
11.34%
24.14%
27.51%
29.88%
Explanation / Answer
Strength of the company (where the ratios are better than teh industry standards.
1. Current Ratio(It has higher ratio than industry)
2. Quick ratio(It has higher ratio than industry)
3. Debt ratio( It is strength because debt ratio is lower than industry)
4. Long term debt total capitalization ( It is strength because debt ratio is lower than industry)
5.Times interest earned ( It is higher than industry)
6. Gross profit margin ( It is higher than industry)
7.Operating profit margin ( It is higher than industry)
8. Net profit margin ( It is higher than industry)
9. Return on investment ( It is higher than industry)
10. Return on equity ( It is higher than industry)
Weakness:
1. Average collection period( Compamy has higher value than indsutry which is a weakness)
2. Inventory turnover( Loe turnover of company over industry is a weakness)
3.Days payable outstanding( Company has lower value which is a weakness)
4.Fixed asset turnover( Company has lower value which is a weakness)
5.Total asset turnover( Company has lower value which is a weakness)
6. Fixed charge coverage( Company has lower value which is a weakness)
Best of Luck. God Bless
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