Carolina Company Computed the Following Ratios for a Two Year

question 14

Essay

Carolina Company computed the following ratios for a two year period:
$$\begin{array} { l l c c } & \underline { \text { Ratio } } & \underline { 2009 } & \underline { 2010 } \\\text { A. } & \text { Current ratio } & 1.3 \text { to } 1 & .6 \text { to } 1 \\\text { B. } & \text { Return on equity } & 25 \% & 16 \% \\\text { C. } & \text { Quality of income } & 1.7 & .5 \\\text { D. } & \text { Cash coverage ratio } & 346& 122 \\\text { E. } & \text { Profit margin } &6 \% & 4 \%\end{array}$$ Required:
Comment on the trend of each of the ratios from 2009 to 2010.State concerns or possible implications for the future of each.

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Definitions:

Short-Term Loans

Borrowed funds that are expected to be repaid within a short period, typically less than a year.