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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
5.6.               Luna Lighting, a retail firm, has experienced modest sales growth over the past three years but has had difficulty translating the expansion of sales into improved profitability. Using three years’ financial statements, you have developed the following ratio calcula- tions and industry comparisons. Based on this information, suggest possible reasons for Luna’s profitability problems.
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Industry Averages
2013Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 2012Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 2011Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 2013
|
Current Average collection period |
2.3X 45 days |
2.3X 46 days |
2.2X 47 days |
2.1X 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% |
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