The following information is available for Warmouth Enterprises: Required For each ratio, indicate whether the change in
Question:
Required
For each ratio, indicate whether the change in the ratio is favorable or unfavorable and why.
Profit margin Return on assets Price to earnings ratio Quick ratio Inventory turnover ratio Receivables turnover ratio Times interest earned 2012 8.7 10.2 13.5 0.8 5.5 11.3 7.2 2011 8.3 10.4 12.0 0.9 7.2 15.5 6.4
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Profit margin 04 increase This is favorable because a higher ratio indicates a greater ability to ge...View the full answer
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Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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