Question: The following ratios are computed based on the financial data of SuperMart, a large company that operates in food and staple retailing. Ratio 2019 2020
The following ratios are computed based on the financial data of SuperMart, a large company that operates in food and staple retailing.
| Ratio | 2019 | 2020 |
| Operating profit margin | 4.54% | 5.06% |
| ROA | 7.96% | 5.74% |
| Current ratio | 1.12:1 | 1.23:1 |
| Quick ratio | 0.28:1 | 0.23:1 |
| Average Inventory turnover period | 36.51 days | 35.26 days |
| Average Accounts Receivable settlement period | 0.69 days | 0.73 days |
| Average Accounts Payable settlement period | 40.62 days | 43.04 days |
Required:
- Interpret the change in the operating profit margin in 2019-2020. Consider carefully what aspect of the operating had changed in the period.
- Interpret the change in the ROA in 2019-2020. Consider carefully what aspect of the operating had changed in the period.
- The operating profit margin and ROA showed opposite trends in 2019-2020. Provide two possible explanations to account for the disparity.
- The company did not have a liquidity issue despite a low quick ratio in both years, why do you think this might be the case.
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