Depkline plc is a pharmaceutical company headquartered in the United Kingdom. Exhibit 7.26

presents financial statement ratios for Depkline for 2011, 2012, and 2013. Respond to each of the following questions.
a. What are the likely reasons for the increase in the profit margin during the three-year period from 2011 to 2013?
b. What are the likely reasons for the decrease in the total asset turnover from 0.88 in 2012 to 0.81 in 2013?
c. What are the likely reasons for the decrease in the current ratio from 1.5 in 2012 to 1.3 in 2013?
d. What are the likely reasons for the pattern of changes in the two cash flow ratios during the three-year period from 2012 to2013?

Transcribed Image Text:

2011 2012 2013 7.6% 8.5% 6.3% Profitability Ratios 18.8% 21.6% 0.87 72.5% 20.4% 23.2% 0.88 64.3% 3.1 5.3 2.2 18.6% 23.0% 0.81 55.8% 3.0 Profit Margin Total Assets Tunover Ratio. Accounts Receivable Turnover Ratio..ARWw Inventory Turnover Ratio 5.2 2.2 Common-Size Income Statement Sales 100.0% 100.0% 1.7 100.0% 2.2 (21.6) (31.2) (14.9) (23.4) (30.6) (14.6) Research and Development. .. Other Operating Expenses. Income Taxes Interest Expense (net of tax effect)... Short-Term Liquidity Risk Ratios (14.5) (0.2) (9.5) (10.4) (10.2) 1.0 52.5% 0.9 Cash Flow from Operations to Current Liabilities... 66.1% 70 70.9% 69 168 105 72 186 100 Long-Term Liquidity Risk Ratios Liabilities to Assets Ratio. ..ARWw 72.2% 19.4% 69.6% 32.6% 15.6 62.2% 18.7% 40,5% 24.7% 22.6 68.0% 22.8% 71.3% 33.7% 14.0 Cash Flow from Operations to Total Liabilities Ratio