Question

3. Consider the following financial information for a home-goods retailer pursuing a low-cost strategy. Please answer these specific questions and be sure to explain your responses: sou What is your overall assessment of this firm's recent financial performance? Are SG&A expenses likely to be rising or falling at this firm from 2012-2016? Are inventory turns likely to be rising or falling? Are interest payments likely to be rising or falling?

Answer 1

a) firm's financial performance has improved from 2012-2016. there is a significant improvement in the revenue from 2012-2016 . the net income also has improved.

b) gross profit = revenue - cost of goods sold , and net income = gross profit -expenses . hence expenses = gross profit -net income.2012-1000000 , 2013-1144000, 2014-1306800,2015-1437480, 2016-1581228 . therefore, it can be concluded that expenses have increased from 2012-2016.

c) inventory is included in the current assets. from the table it is seen that total asset has increased. since any other information is not given ,it can be assumed that inventory has also increased.but if the stock is increasing , then turns are reducing.

d) interest payable is a liability and is included in the current liability of the balancesheet. since the total liabilities are increasing and no other relevant information is available we can assume that current liabilities are increasing so are interest payables.