Question

Briefly analyze the ratios, then Construct only a list of strengths and a list weaknesses.

Gallery of Dreams Ratios
Ratio	Industry	2015	2014	2013
Current	2.50x	4.48x	4.06x	3.48x
Quick	0.80x	1.47x	1.18x	0.96x
Average collection period	11 days	16 days	15 days	9 days
Inventory turnover	2.30x	1.19x	1.24x	1.37x
Days payable outstanding	15 days	11 days	12 days	8 days
Fixed asset turnover	17.50x	9.74x	9.09x	8.85x
Total asset turnover	2.80x	1.50x	1.67x	1.82x
Debt ratio	62.00%	29.47%	34.04%	39.17%
Long term debt to total capitalization	25.53%	14.09%	18.91%	22.33%
Times interest earned	9.93x	22.02x	19.00x	14.23x
Fixed charge coverage	8.69x	4.59x	4.47x	4.25x
Gross profit margin	31.10%	59.21%	59.39%	58.52%
Operating profit margin	8.06%	22.05%	21.86%	20.52%
Net profit margin	4.32%	11.89%	11.00%	10.97%
Return on investment	9.21%	17.97%	18.28%	18.35%
Return on equity	11.34%	24.14%	27.51%	29.88%

 

Answer 1

Strength of the company (where the ratios are better than teh industry standards.
1. Current Ratio(It has higher ratio than industry)
2. Quick ratio(It has higher ratio than industry)
3. Debt ratio( It is strength because debt ratio is lower than industry)
4. Long term debt total capitalization ( It is strength because debt ratio is lower than industry)
5.Times interest earned ( It is higher than industry)
6. Gross profit margin ( It is higher than industry)
7.Operating profit margin ( It is higher than industry)
8. Net profit margin  ( It is higher than industry)
9. Return on investment ( It is higher than industry)
10. Return on equity ( It is higher than industry)

Weakness:
1. Average collection period( Compamy has higher value than indsutry which is a weakness)
2. Inventory turnover( Loe turnover of company over industry is a weakness)
3.Days payable outstanding( Company has lower value which is a weakness)
4.Fixed asset turnover( Company has lower value which is a weakness)
5.Total asset turnover( Company has lower value which is a weakness)
6. Fixed charge coverage( Company has lower value which is a weakness)

Best of Luck. God Bless
Please Rate Well