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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Definitions:

Optimal Way

The most efficient or effective method for achieving a specific goal or outcome.

Serious Cash Shortage

A financial situation where an entity lacks sufficient funds to cover its immediate or short-term obligations, leading to potential liquidity issues.

Venture

An undertaking that is typically risky but offers the potential for significant rewards, often associated with new businesses or startups.

Capital

Wealth in the form of money or other assets owned by a person or organization or available for purposes such as starting a company or investing.