Barnes knows that SKI sells on the same credit terms as other firms in the industry. Use the ratios presented in Table IC 15-1 to explain whether SKI?s customers pay more or less promptly than those of its competitors. If there are differences, does that suggest that SKI should tighten or loosen its credit policy? What four variables make up a firm?s credit policy, and in what direction should each be changed by SKI?

Transcribed Image Text:

Table IC 15-1. Selected Ratios: SKI and Industry Average SKI Industry Current 1.75 2.25 Debt/assets 58.76% 50.00% Turnover of cash and securities 16.67 22.22 Days sales outstanding (365-day basis) Inventory turnover 45.63 32.00 4.82 7.00 Fixed assets turnover 11.35 12.00 Total assets turnover 2.08 3.00 Profit margin Return on equity (ROE) 2.07% 3.50% 10.45% 21.00%