Question: Based upon your financial ratio analysis, what questions would you like to propose to management...

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Accounting

Question: Based upon your financial ratio analysis, whatquestions would you like to propose to management to gain clarityon the business operations?
Industry Financial Ratio Standards:
Ratio
Industry Norm
Milan Fashions Ratios2015
Evaluation*
Current ratio
4.5 times
13.25
Good
Long-term debt-to-Equity ratio
12%
5.36%
Good
Debt-to-Equity ratio
30%
10.08%
Good
Total Debt ratio
20%
9.16%
Good
Financial leverage ratio
1.10
1.1
Fair
Inventory turnover
7 times
6 times
Poor
Fixed asset turnover
1.8 times
2.99 times
Good
Debt-to-Capital ratio
43.4%
10.32%
Good
Interest coverage ratio
5.0 times
18 times
Good
Return on Assets
8.4%
2.15%
Poor
Ratio
Industry Norm
Milan Fashions Ratios2016
Evaluation*
Current ratio
4.5 times
21.54
Good
Long-term debt-to-Equity ratio
12%
6.92%
Good
Debt-to-Equity ratio
30%
9.86%
Good
Total Debt ratio
20%
8.97%
Good
Financial leverage ratio
1.10
1.1
Fair
Inventory turnover
7 times
6 times
Poor
Fixed asset turnover
1.8 times
2.6 times
Good
Debt-to-Capital ratio
43.4%
10.17%
Good
Interest coverage ratio
5.0 times
20 times
Good
Return on Assets
8.4%
2.22%
Poor
*Possible ratings: Good (Highest);Fair (Middle); Poor (Lowest)

Answer & Explanation Solved by verified expert

3.9 Ratings (609 Votes)

Questions on all three ratings Good Fair and Poor can be proposed to the management but to understand more on the business operations we should first know the areas where major attention is required It means where the results are not as per the standard norms Hence questions are required to propose to Management on the Poor performance as reasons for such poor performance should be given more priority See Answer

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Ratio	Industry Norm	Milan Fashions Ratios2015	Evaluation*
Current ratio	4.5 times	13.25	Good
Long-term debt-to-Equity ratio	12%	5.36%	Good
Debt-to-Equity ratio	30%	10.08%	Good
Total Debt ratio	20%	9.16%	Good
Financial leverage ratio	1.10	1.1	Fair
Inventory turnover	7 times	6 times	Poor
Fixed asset turnover	1.8 times	2.99 times	Good
Debt-to-Capital ratio	43.4%	10.32%	Good
Interest coverage ratio	5.0 times	18 times	Good
Return on Assets	8.4%	2.15%	Poor

Ratio	Industry Norm	Milan Fashions Ratios2016	Evaluation*
Current ratio	4.5 times	21.54	Good
Long-term debt-to-Equity ratio	12%	6.92%	Good
Debt-to-Equity ratio	30%	9.86%	Good
Total Debt ratio	20%	8.97%	Good
Financial leverage ratio	1.10	1.1	Fair
Inventory turnover	7 times	6 times	Poor
Fixed asset turnover	1.8 times	2.6 times	Good
Debt-to-Capital ratio	43.4%	10.17%	Good
Interest coverage ratio	5.0 times	20 times	Good
Return on Assets	8.4%	2.22%	Poor