Scandi Home Furnishings Free Essays

Liquidity is strong in both years but liquidity does appear to be weak from year to year. B. Conversion Period Ratio2006-20072007-2008Indicated Impact on Cash Conversion Cycle Inventory-to-sale 192. We will write a custom essay sample on Scandi Home Furnishings or any similar topic only for you Order Now 6 days 159. 3 days(33. 3)(shortens C3) Sale-to-cash 56. 0 days 62. 9 days6. 9 (lengthens C3) Purcahse-to-payment 85. 2 days 72. 4 days(12. 7)(shortens C3) Cash conversion cycle (C3) 163. 4 days 149. 8 days(13. 7)(shorter C3) C. 20072008 Cash build 1,440,000 1,700,000 Cash burn 1,423,000 1,914,000Net Cash build/cash burn 17,000 (214,000) Cash burn has increased more than cash build due to the increase in the marketing expenses. D. 2006-20072007-2008 Current Liability to Total Debt46. 15%44. 90% Interest Coverage 5. 26 2. 00 Debt to Equity 1. 55 2. 09 The current liabilities are somewhat unchanged from year to year. The firm is utilizing total debt more than equity with earnings decreasing and interest increases. E. 20072008 Gross Profit Margin0. 40. 3 Operating Profit Margin16. 47%4. 44% Net Profit Margin7. 60%0. 33%NOPAT Margin9. 88%2. 67% Profitability is has decreased significantly due to the increase in interest and expenses while, the gross profit margin has remained somewhat unchanged. F. 20072008 Sales to Total Assets 1. 36 1. 35 Operating Return on Assets22. 45%5. 99% Return on Assets10. 36%0. 45% Return on Equity25. 33%1. 27% Sales to Total Assets ratios remains unchanged while all other ratios are decreasing significantly and profitability is decreasing due to expenses that are not related to sales. G. 20072008 7. 60%0. 33% 1. 36 1. 5 ROA Model10. 36%0. 45% 20072008 Net Profit margin7. 60%0. 33% Asset Turnover 1. 36 1. 35 Equity Multiplier 2. 44 2. 82 ROE Model25. 33%1. 27% The increase in marketing and admin expenses from sales is causing the ratios to decrease. Both models are showing the multipliers are steady but the returns from the net profit margin appear to be causing the ratios to decrease. H. During 2006-2008, Scandi takes on average 0. 5 days faster than the industry average to complete the sale-to –cash conversion.During 2006-2008, Scandi takes on average 43 days shorter to complete the total cash conversion cycle. I. When comparing Scandi’s net profit margin to the industry, it outperformed during 2007 and was far below the average in 2008. The Sales to Assets ratio was constant when compared to the industry average. Scandi’s Total-Debt to Total-Assets ratio was 61% in 2007 and 68% in 2008, which were well below the industry during this time. The ROE will be much higher than the industry standard due to the dependency on debt. The ROA will be higher in 2007 compared to the industry and will be lower in 2008 due to a lower net profit margin. How to cite Scandi Home Furnishings, Papers