3. a) How do the ratios you calculated for this year compare to those of the typical company in the industry?
b) Describe and explain the areas that could cause the company problems in the future.
RATIO James Percent
Confectioners Confectionary Variation
Current Last Industry from
Year Year Mean* Ind. Mean
Liquidity Ratios
Current Ratio 2.01 1.86 1.7 18.0%
Quick Ratio 1.16 1.07 0.8 45.5%
Leverage Ratios
Debt Ratio 0.62 0.64 0.7 -11.5%
Debt-to-Net Worth Ratio 1.60 1.71 1.7 -6.0%
Times Interest Earned Ratio 2.38 2.49 2.3 3.5%
Operating Ratios
Average Inventory Turnover Ratio 4.39 4.75 4.9 -10.4%
Average Collection Period Ratio 47.6 34.6 23.0 days 107.2%
Average Payable Period Ratio 34.4 31.3 33.5 days 2.8%
Net Sales to Total Assets Ratio 1.93 2.17 2.1 -7.9%
Profitability Ratios
Net Profit on Sales Ratio 4.24% 7.40% 7.0% -39.4%
Net Profit to Assets Ratio 8.20% 9.20% 5.6% 46.4%
Net Profit to Equity Ratio 21.29% 29.21% 16.5% 29.0%
One of the most significant concerns is in the average collection period. James Confectioners is waiting more than three weeks longer than the industry average for payment. This is taking a serious toll on cash flow and may result in increasing the chances for uncollectible debt. This limited cash flow threatens the viability of the business.
3. a) How do the ratios you calculated for this year compare to those of the...
2. a) How do the ratios that you calculated for this year compare to those that Ivey calculated for the company last year? b) What factors from the case are most likely to account for those changes? Ratio Current Year Last Year Percent Variation Liquidity Ratios Current ratio 2.01 1.86 8.1% Quick ratio 1.07 Leverage Ratios Debt ratio 0.64 Debt-to-Net-Worth ratio 1.71 Times-Interest-Earned ratio 2.49 Operating Ratios Average Inventory Turnover Ratio 4.75 Average Collection Period Ratio 34.60 Average Payable Period...
4. Develop a set of specific recommendations for improving the financial performance of James Confectioners using the analysis you conducted in questions 1 to 3. 5. What pricing recommendations and rationale can you make to James Confectioners? James Confectioners—Part 1 Squeezed by Rising Costs, a Confectioner about the impact of the rapidly rising cost of the base choco- Struggles to Cope late, however. Bad weather in South America and Africa, where most of the world's cocoa is grown, and a...
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