Question
Financial Ratio RPI,Inc. Industry Standard Current ratio 2.14 1.8 Acid-test ratio 0.87 0.9 Debt ratio 0.50 0.5 Long-term debt to total capitalization 0.34 0.7 Times
Financial Ratio | RPI,Inc. | Industry Standard |
Current ratio | 2.14 | 1.8 |
Acid-test ratio | 0.87 | 0.9 |
Debt ratio | 0.50 | 0.5 |
Long-term debt to total capitalization | 0.34 | 0.7 |
Times interest earned | 12.00 | 10 |
Average collection period | 20.86 | 20 |
Inventory turnover (based on COGS) | 6.99 | 7 |
Return on total assets | 26.88% | 8.40% |
Gross profit margin | 28.57% | 25.00% |
Operating income return on investment | 26.88% | 16.80% |
Operating profit margin | 17.14% | 14.00% |
Total asset turnover | 1.57 | 1.2 |
Fixed asset turnover | 2.41 | 1.8 |
Which of the ratios reported above in the industry norms do you feel should be most crucial in determining whether the bank should extend the line of credit? Why? (4 Marks) (500 words)
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