Question
I need help paraphrasing these 6 sentences 1-The current ratio and quick ratio were a little below the industry average initially. However, the quick ratio
I need help paraphrasing these 6 sentences
1-The current ratio and quick ratio were a little below the industry average initially. However, the quick ratio fell by a lot while the current ratio fell by just a little. This indicates a build-up in inventory relative to other current assets.
2-All asset management ration were close to the industry averages initially (although the DSO was a little better than the industry average. However, all ratios worsened, with the inventory turnover showing the biggest change, which again indicates a buildup in inventory.
3-All profit margins improved and are comparable to the industry averages.
4- ROE improved because the profit margin improved and the equity multiplier increases, despite the reduction in the total asset turnover ratio. Thus, J&W became more profitable, more leveraged, but less efficient.
5-Common size analysis shows that inventories now make up a greater proportion of assets and that the combined long-term debt and notes payable make up a greater proportion of liabilities & equity. Profits margins have gone up (even though interest expense has also gone up).
6- Percent change analysis shows that sales increased at a rate of 5%, but that several items grew much faster. For example, inventories grew by 50%. Notes payable also grew by a substantial amount. Fortunately, profitability also grew by more than sales. The trend analysis confirms that profitability increased, but the increase in inventories is a red flag.
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