Financial Ratio Data Is Listed Below for Gallery of Dreams

question 29

Essay

Financial ratio data is listed below for Gallery of Dreams.Construct a list of strengths and weaknesses for the firm after analyzing the ratios.
Gallery of Dreams
Ratios
$\begin{array}{lrrrr}\text { Ratio }&\text { Industry }&2015&2014&2013\\\hline\text { Current } & 2.50 \mathrm{x} & 4.48 \mathrm{x} & 4.06 \mathrm{x} & 3.48 \mathrm{x} \\\text { Quick } & 0.80 \mathrm{x} & 1.47 \mathrm{x} & 1.18 \mathrm{x} & 0.96 \mathrm{x} \\\text { Average collection period } & 11 \text { days } & 16 \text { days } & 15 \text { days } & 9 \text { days } \\\text { Inventory turnover } & 2.30 \mathrm{x} & 1.19 \mathrm{x} & 1.24 \mathrm{x} & 1.37 \mathrm{x}\\\text { Days payable outstanding } & 15 \text { days } & 11 \text { days } & 12 \text { days } & 8 \text { days } \\\text { Fixed asset turnover } & 17.50 \mathrm{x} & 9.74 \mathrm{x} & 9.09 \mathrm{x} & 8.85 \mathrm{x} \\\text { Total asset turnover } & 2.80 \mathrm{x} & 1.50 \mathrm{x} & 1.67 \mathrm{x} & 1.82 \mathrm{x} \\\text { Debt ratio } & 62.00 \% & 29.47 \% & 34.04 \% & 39.17 \%\\\text { Long term debt to }\\\text { total capitalization } & 25.53 \% & 14.09 \% & 18.91 \% & 22.33 \% \\\text { Times interest earned } & 9.93 \mathrm{x} & 22.02 \mathrm{x} & 19.00 \mathrm{x} & 14.23 \mathrm{x} \\\text { Fixed charge coverage } & 8.69 \mathrm{x} & 4.59 \mathrm{x} & 4.47 \mathrm{x} & 4.25 \mathrm{x} \\\text { Gross profit margin } & 31.10 \% & 59.21 \% & 59.39 \% & 58.52 \% \\\text { Operating profit margin } & 8.06 \% & 22.05 \% & 21.86 \% & 20.52 \%\\\text { Net profit margin } & 4.32 \% & 11.89 \% & 11.00 \% & 10.97 \% \\\text { Return on investment } & 9.21 \% & 17.97 \% & 18.28 \% & 18.35 \% \\\text { Return on equity } & 11.34 \% & 24.14 \% & 27.51 \% & 29.88 \%\end{array}$

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