Scandi Home Furnishings

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A.
2006-2007
Current Ratio = Current Assets/Current Liabilities
=(1,500,000/2) / (600,000/2)
= 2.5

Quick Ratio = (CA - Inventories)/CL
=(1,500,000/2)-(950,000)/2)/(600,000)/2)
= 0.92

NWC to Total Assets Ratio = (CA - CL)/Assets
=(1,500,000/2)-(600,000)/2)/(2,200,000/2)
= 40.9%

2007-2008
Current Ratio = Current Assets/Current Liabilities
=(1,770,000/2) / (774,000)/2)
= 2.29

Quick Ratio = (CA - Inventories)/CL
=(1,770,000/2)-(1,100,000/2))/(774,000)/2)
= 0.87

NWC to Total Assets Ratio = (CA - CL)/Assets
=(1,770,000/2)-(774,000/2)/(2,670,000/2)
= 37.3%

Liquidity is strong in both years but liquidity does appear to be weak from year to year.

B.

Conversion Period Ratio2006-20072007-2008Indicated Impact on Cash Conversion Cycle Inventory-to-sale 192.6 days 159.3 days(33.3)(shortens C3) Sale-to-cash 56.0 days 62.9 days6.9 (lengthens C3) Purcahse-to-payment 85.2 days 72.4 days(12.7)(shortens C3) Cash conversion cycle (C3) 163.4 days 149.8 days(13.7)(shorter C3)

C.
20072008
Cash build 1,440,000 1,700,000
Cash burn 1,423,000 1,914,000
Net Cash build/cash burn 17,000 (214,000)

Cash burn has increased more than cash build due to the increase in the marketing expenses. D.
2006-20072007-2008
Current Liability to Total Debt46.15%44.90%
Interest Coverage 5.26 2.00
Debt to Equity 1.55 2.09

The current liabilities are somewhat unchanged from year to year. The firm is utilizing total debt more than equity with earnings decreasing and interest increases. E.
20072008
Gross Profit Margin0.40.3
Operating Profit Margin16.47%4.44%
Net Profit Margin7.60%0.33%
NOPAT Margin9.88%2.67%

Profitability is has decreased significantly due to the increase in interest and expenses while, the gross profit margin has remained...
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