Accounting: Financial Ratios and Net Profit Margin Essay

Submitted By jeansande

Words: 289

Pages: 2

Luna Lighting, has an small sales profit in the last three fiscal years but had hard time translating the growth in sales into a profit for the company. I have used the last three years’ financial statement, the following ratio calculations and industry companions. Based on the information from the company, I suggest latest reasons for company to turn a profit. YEARS 2009 2008 2007 2009
Current 2.3X 2.3X 2.2X 2.1X
Average Collect period 45 days 46 days 47 days 50 days
Inventory turnover 8.3X 8.2X 8.1X 8.3X
Fixed asset turnover 2.7X 3.0X 8.1X 8.3X
Total asset turnover 1.1X 1.2X 1.3X 1.5X
Debt ratio 50% 50% 50% 54%
Times charge coverage 81X 8.2X 8.1X 7.2X
Fixed charge coverage 4.0X 4.5X 5.5X 5.1X
Gross profit margin 43% 43. % 43% 40%
Operating profit margin 6.3% 7.2% 8.0% 7.5%
Net profit margin 3.5% 4.0% 4.3% 4.2%
Return on asset 3.7% 5.0% 5.7% 6.4%
Return on equity 7.4% 9.9% 11.4% 11.8%
Based on the information, some

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