A few years ago, I decided to expand my coffee shop business and bought a coffee roaster.
Question:
A few years ago, I decided to expand my coffee shop business and bought a coffee roaster. I created my own brand, America’s famous, and started selling vacuum-packed coffee in local supermarkets. It was a huge success! Sales of my vacuum-packed coffee skyrocket and soon become the item most sold in my company. To be honest, I have concentrated on sales and no other items in the income statement or balance sheet. A finance intern from Kean University prepared the Table below. I am a little embarrassed to confess that I don’t know what most of the ratios mean. However, I noticed that some of the ratios are below the industry median, and I am anxious.
Should I be worried?
Is my business on the edge of being broke?
What can you say about the financial performance of The America’s famous Co?
Do you have any suggestions?
| The America’s famous Co. | Industry Median | |
| Current ratio | 0.74 | 1.43 |
| Quick ratio | 0.39 | 0.35 |
| Cash ratio | 0.15 | 0.21 |
| Total asset turnover | 2.01 | 0.85 |
| Inventory turnover | 27.96 | 6.15 |
| Receivables turnover | 54.91 | 9.82 |
| Total debt ratio | 0.43 | 0.52 |
| Debt-equity ratio | 0.74 | 1.08 |
| Equity multiplier | 1.74 | 2.08 |
| Times interest earned | 5.26 | 8.06 |
| Cash coverage ratio | 8.12 | 9.41 |
| Profit margin | 5.01% | 5.10% |
| Return on assets | 10.08% | 9.53% |
| Return on equity | 17.59% | 15.14% |
Expert Answer:
Looking at the financial ratios provided for The Americas Famous Co and comparing them to the industry median here are some observations 1 Liquidity Ratios Current ratio Your current ratio of 074 is b... View the full answer
