3 of 6 QUESTION 1: RATIO ANALYSIS (30 marks) Use the ratios that were calculated for a retailer, DEL Company, and the industry in which it operates 1. Provide a brief introduction on ratio analysis and its importance. 2. Analyse these results in depth and highlight the possible strengths and/or weaknesses of DEL Company compared to Industry. 3. Explain the possible reasons for the deviations and what action should (if any) be taken to remedy the situation, in a short report to the CEO of DEL Company Ratio DEL Company Industry Average 1. Gross Profit Margin 53% 2 Net Profit Margin 115 9% 3. ROI 13 15% 4. Mark-up margin 75% 5. Networking capital N$ 250 000 N$ 400 000 6. Quick Ratio 0,7 times 1.3 times 7. Inventory turnover 4 times p/a 6 times p/a 8. ACP (credit terms are 30 days) 34 days 30 days 9. APP (payment terms are 60 days) 61 days 10 Debt Ratio 32% 35% 11 Debt/Equity Ratio 20% 33% 12 EPS 306 13 PER 8 times 6 times 75% 75 days 3 of 6 QUESTION 1: RATIO ANALYSIS (30 marks) Use the ratios that were calculated for a retailer, DEL Company, and the industry in which it operates 1. Provide a brief introduction on ratio analysis and its importance. 2. Analyse these results in depth and highlight the possible strengths and/or weaknesses of DEL Company compared to Industry. 3. Explain the possible reasons for the deviations and what action should (if any) be taken to remedy the situation, in a short report to the CEO of DEL Company Ratio DEL Company Industry Average 1. Gross Profit Margin 53% 2 Net Profit Margin 115 9% 3. ROI 13 15% 4. Mark-up margin 75% 5. Networking capital N$ 250 000 N$ 400 000 6. Quick Ratio 0,7 times 1.3 times 7. Inventory turnover 4 times p/a 6 times p/a 8. ACP (credit terms are 30 days) 34 days 30 days 9. APP (payment terms are 60 days) 61 days 10 Debt Ratio 32% 35% 11 Debt/Equity Ratio 20% 33% 12 EPS 306 13 PER 8 times 6 times 75% 75 days