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Category > Management Posted 20 Jan 2018 My Price 7.00

Luna Lighting

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.

 

 

Industry Averages

2013                    2012                    2011                      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%

 

 

Answers

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Status NEW Posted 20 Jan 2018 12:01 AM My Price 7.00

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