Question: Of the financial ratios that are used for the industry standard, which do you feel...

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Question: Of the financial ratios that are used for the industrystandard, which do you feel are most important when determiningwhether First United should approve the loan to Milan Fashions?What do you feel are the strong and weak points of thecompany in your financial analysis?
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

4.5 Ratings (939 Votes)

Ratio Industry Norm Milan Fashions Ratios 2015 Evaluation meaning Current ratio 45 times 1325 Good It is a measure of liquidity Longterm debttoEquity ratio 12 536 Good It reflects the relative claims of creditors and shareholders against the assets of the firm DebttoEquity ratio 30 1008 Good It reflects the relative claims of creditors and shareholders against the assets of the firm Total Debt ratio 20 916 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