Scantania is a Swedish company that manufactures trucks and other heavy vehicles and provides financing for its customers’ purchases.
Exhibit 7.27 presents financial statement ratios for Scantania for 2011, 2012, and 2013.

The amount on the common-size income statement for Net Financing Income is the difference between interest earned on receivables from customers and interest expense on amounts borrowed to finance those receivables.
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 decreasing cost of goods sold to sales percentage combined with the increasing inventory turnover ratio during the three-year period?
c. What are the likely reasons for the increase in the fixed-asset turnover between 2012 and 2013?
d. The total assets turnover remained at 0.85 between 2011 and 2012, yet the accounts receivable, inventory, and fixed-asset turnovers increased. What is the likely explanation for the stable total assets turnover?
e. What are the likely explanations for the increase in the two cash flow ratios between 2011 and 2012?
f. What are the likely reasons for the decrease in the current and quick ratios between 2012 and2013?

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