Question

Refer to the following data:

Selected Ratios: SKI and Industry Average
	SKI	Industry
Current	1.75	2.25
Debt/Assets	58.76%	50.00%
Turnover of cash and securities	16.67	22.22
Days sales outstanding (365-day basis)	45.63	32
Inventory turnover	4.82	7
Fixed assets turnover	11.35	12
Total assets turnover	2.08	3
Profit margin	2.07%	3.50%
Return on equity (ROE)	10.45%	21.00%

Answer the following:

Find EVA using available data (make reasonable assumptions)

Answer 1

A relaxed policy may be appropriate if it
reduces risk more than profitability.
 However SKI is much less profitable However, SKI is much less profitable
than the average firm in the industry.
Thi t th t th This suggests that the company
probably has excessive working capital

The cash conversion cycle The cash conversion cycle focuses on the time focuses on the time
between payments made for materials and
labor and payments received from sales