Summarize the information fromthe 3 years' financial statements, theratio calculations, and industry comparisons provided in the case
Question:
Summarize the information fromthe 3 years' financial statements, theratio calculations, and industry comparisons provided in the case topresent possible solutions to the company's profitability problems. Be sure to conclude with projecting the future success of the company based on your findings.
Industry Averages
2016 2015 2014 2016
Current2.3X 2.3X 2.3X 2.2X 2.1X
Average collection period 45 days 46 days 47 days 50 days
Inventory turnover 8.3X 8.2X 8.1X 8.3X
Fixed asset turnover 2.7X 3.0X 3.3X 3.5X
Total asset turnover 1.1X 1.2X 1.3X 1.5X
Debt ratio 50% 50% 50% 54%
Times interest earned 8.1X 8.2X 8.1X 7.2X
Fixed charge coverage 4.0X 4.5X 5.5X 5.1X
Gross profit margin 43% 43% 43% 40%
Operating profit margin 6.3% 7.2% 8.0% 7.5%
Net profit margin 3.5% 4.0% 4.3% 4.2%
Return on assets 3.7% 5.0% 5.7% 6.4%
Return on equity 7.4% 9.9% 11.4% 11.8%
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston