Question

Using the financial information provided on the attached income statement and balance sheet for Lakeside Company, perform the following analytical procedures:

Ratio	2007	2008
Current	1.36	1.36
# Days inventory on hand	93.03	100.52
Receivable collection period (days)	20.63	24.71
Debt-to-total-assets	75%	75%
Times interest earned	3.58 times	2.79 times
Profit Margin	2.79%	2.27%
Return on Assets	8.48%	6.73%
Return on Equity	33.17%	26.41%

What is your overall assessment of the significance of the ratios in 2007 and 2008?

                 

What is your overall assessment of the change in ratios from 2007 to 2008?

Answer 1

Importance of financial ratios:

To ensure the continued profitability of your enterprise, use financial ratios and evaluate it. the importance of financial ratios become evident when you compare important data such as assets and liabilities. once you understand your margin of safety we can make important decisions to run your business successfully.

changes in ratios from 2007 to 2008 :

By observing the difference in the ratios between the 2007 and 2008 we can clearly say that the overall profitability in 2008 has been decreased.

profit margin ratio, return on equity, and return on assets has been reduced in 2008