Question

Current ratio Return on assets Return on equity Inventory turnover AR turnover Debt to equity Profit margin Gross profit 2012

The ratios for Coke and Dr. Pepper for 2012 are shown above. Which ratio shows signs of poor financial health for COKE?

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Answer #1

Through our analysis we found that the following ratio shows signs of poor financial health for COKE is -

Debt to Equity ratio because ideal debt equity ratio for any business organisation is 2:1  i.e. debt should not be more than two times of equity. If proportion of debt increases in our capital than our interest liability increases which is very harmful for our organisation.

Debt Equity ratio of COKE is 8.5 : 1. Hence, it shows poor financial health.

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