Question

Mode Milano is a bridal gown manufacturing company in Milan. Recently, the company received an order for $500,000 of merchandise from HG Lang with payment to be made within 60 days of delivery. Mode asked Lang to provide a copy of its audited financial statements from 2012 and 2011 so that it could analyze them before accepting the order.
HG Lang Designs operates an exclusive bridal boutique in Manhattan. All gowns are designed by Lang but are manufactured by various small firms in France and Italy. The following financial information for the company relates.


HG Lang Designs
Income Statements


Required
a. Compute the following ratios to help Mode Milano decide whether to accept the order from HG Lang: current ratio, acid test, debt-to-equity ratio, times interest earned, and return on total assets.
b. Based on the analysis in part a, does it appear that HG Lang will have any difficulty paying its bill to ModeMilano?


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  • CreatedSeptember 23, 2013
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