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

Answer:

Here we have to explain the given ratio's strengths and weakness,

They are,

• By taking a gander at the Current and Quick Ratios, it is seen that liquidity administration of the organization much superior to industry norms. It has extemporized its liquidity administration from 2013 to 2015. By and by, organization can have the capacity to meet any prompt liquidity prerequisites absent much issue.
• Regarding Average Collection Period, Inventory Turnover and Days Payable Outstanding, the organization is falling behind the business gauges. It needs to enhance working capital administration and net working cycle and bring as close as industry principles or superior to that.
• As far as dissolvability proportions like Fixed Asset TO, Total Asset TO, Debt Ratio or LT Debt to Total Capitalization, organization unfit to meet industry models, this could be because of ill-advised resource risk administration. Organization unfit to utlize its advantages legitimately and augmenting the advantages. It needs a consideration.
• As to gainfulness proportions, organization is doing far between than industry benchmarks, that demonstrates that because of low obligation load on organization, it can produce more working salary than its rivals as the intrigue and taxation rates are less. With a specific end goal to develop organization must contribute or extends its business through obligation by expanding up to industry models or through value by held income more as opposed to paying profits.

Therefore,the above points are clearly stated that the strngths and weakness of the given ratio's.