Luna Lighting is having the following profitability problems in 2009 when compared to the indusrty averages for 2009. Though it is great that the Current, Average collection period are better than than the industry average there is still some needed improvements. Inventory turnover, fixed asset turnover, and Total asset turnover could be increased to above industry averages. The company needs to work on getting their debt ratio lower than 50% and even lower than the 54% industry average. The Times interest earned is better than the industry average at 8.1 times and needs to be maintained at thst level if possible to prevent loering numbers. The fixed charge coverage need to be raised above industry average of 5.1 times instead of the 4.0 times in 2009 for the company average. The company is doing great with maintaining the gross profit margin for the company at 43% during the past three years to make it above the industry average of 40%. The company needs to continue this progress with maintaining the figures of the gross profit margin or possibly increase it if necessary.
One of the major concerns that I see is the operating profit and net profit margin averages for Luna Lighting in 2009. There needs to be an increase in the operating profit margin to increase the average above the 7.5% of the industry average. The net profit margin needs to increase above the industry average of 4.2 % as well. The Return on assets needs to be increased dramatically to be above the industry average of 6.4%. The low average of 3.7% on the return on assets might be the main reason for the company’s profitability problems and needs to be addressed soon. The problem with the profitability problems are not helped by the really low average on the return of equity of 7.4% when compared to the industry average of 11.8%, which needs be addressed soon as well. Though a decrease in the the profitability problems of Luna Lighting will aid in resolving the low average for the return on...
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