Hey, please help me with the following answers. Also, please keep the language simple, because I do not fully understand accounting terms yet. Thank you. (see below)
- What does the calculation of each ratio represent?
- How does year one compare with year two, and what trend can be seen when you compare the two years?
- Is the trend from year one to year two positive or negative?
- What are the possible reasons for the trend?
- What recommendations do you have for turning a negative trend to a positive trend.
|
Ratio |
Year 1 |
Year 2 |
|
Current ratio |
3.12:1 |
2.96:1 |
|
Quick ratio |
1.34:1 |
1.02:1 |
|
Receivables turnover |
9.7 times |
10.2 times |
|
Inventory turnover |
2.4 times |
2.3 times |
|
Profit margin |
11.4% |
12.6% |
|
Asset turnover |
1.21 times |
1.22 times |
|
Return on assets |
13.7% |
15.4% |
|
Return on equity |
28.5% |
29.3% |
|
Price earnings ratio |
10.4 times |
12.4 times |
|
Debt ratio |
50.2% |
45.3% |
|
Times interest earned |
9.6 times |
13.0 times |