Reitmans (Canada) Limited and Danier Leather Inc. are two companies with clothing stores within Canada. Selected financial
Question:
Reitmans (Canada) Limited and Danier Leather Inc. are two companies with clothing stores within Canada. Selected financial data (in thousands) for these two companies for a recent year are as follows:
Instructions
1. For each company, determine the following measures, rounding to one decimal place. Industry averages are provided in parentheses after each ratio.
a. Current ratio (1.9:1)
b. Accounts receivable turnover (13.6 times)
c. Inventory turnover (5.8 times)
d. Total asset turnover (1.5 times) e. debt ratio (56%)
f. Times interest earned ratio (7.4 times)
g. Profit margin (3.1%)
h. Return on assets (4.6%)
i. Return on shareholders' equity (10.5%)
2. Compare the liquidity, efficiency, solvency, and profitability of the two companies to each other and to the industry.
3. Which company would be more appealing to an investor? Explain your decision.
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Step by Step Answer:
Accounting Volume 2
ISBN: 978-0176509743
2nd Canadian edition
Authors: James Reeve, Jonathan Duchac, Sheila Elworthy, Carl S. Warren