Based upon the financial ratio analysis you will have performed on Milan Fashions, would you recommend that
Question:
Based upon the financial ratio analysis you will have performed on Milan Fashions, would you recommend that there should be an approval of the loan request? I want you to state your analysis in a detailed memorandum to me by Monday of next week. I would like to discuss your analysis and hear your ideas on Milan Fashions in a meeting on Tuesday. The clients will be in our offices next Friday to discuss their loan request. Please feel free to contact me if there are any questions on this matter.
Industry Financial Radio Standards
Ratio | Industry Norm | Milan Fashions Ratios 2015 | Evaluation* |
Current ratio | 4.5 times | 13.25 | Good |
Long-term debt-to-equity ratio | 12% | 5.36% | Good |
Debt-to-Equity ratio | 30% | 10.08% | Good |
Total Debt ratio | 20% | 9.16% | Good |
Financial leverage ratio | 1.10 | 1.1 | Fair |
Inventory turnover | 7 times | 6 times | Poor |
Fixed asset turnover | 1.8 times | 2.99 times | Good |
Debt-to-Capital ratio | 43.4% | 10.32% | Good |
Interest coverage ratio | 5.0 times | 18 times | Good |
Return on Assets | 8.4% | 2.15% | Poor |
Ratio | Industry Norm | Milan Fashions Ratios 2016 | Evaluation* |
Current ratio | 4.5 times | 21.54 | Good |
Long-term debt-to-equity ratio | 12% | 6.92% | Good |
Debt-to-Equity ratio | 30% | 9.86% | Good |
Total Debt ratio | 20% | 8.97% | Good |
Financial leverage ratio | 1.10 | 1.1 | Fair |
Inventory turnover | 7 times | 6 times | Poor |
Fixed asset turnover | 1.8 times | 2.6 times | Good |
Debt-to-Capital ratio | 43.4% | 10.17% | Good |
Interest coverage ratio | 5.0 times | 20 times | Good |
Return on Assets | 8.4% | 2.22% | Poor |
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng