Can a Ratio Be Too Good?

Tony Christopher is analyzing the financial statements of Shaycole Company and has computed the following ratios:

Andy Martinez, Tony’s colleague, tells Tony that Shaycole looks great. Andy points out that, although Shaycole’s ratios deviate significantly from the industry norms, all the deviations suggest that Shaycole is doing better than other firms in its industry. Is Andy right?

Transcribed Image Text:

Shaycole Current ratio Asset turnover Debt ratio 4.7 1.8 times 0.317 Industry Comparison 1.9 1.4 times 0.564