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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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