Question

Industry Lululime Ltd. Ratios 2020 2020 2019 2018 Profit margin 5.81% 5.5% 5.62% 6.25% Return on...

Industry

Lululime Ltd. Ratios

2020

2020

2019

2018

Profit margin

5.81%

5.5%

5.62%

6.25%

Return on assets

8.48%

6.34%

7.79%

9.38%

Return on equity

10.10%

14.24%

15.72%

17.05%

Receivable turnover

9.31 ×

6.54x

7.8x

10x

Average collection period

35.6 days

55.8 days

46.7 days

36.5 days

Inventory turnover

5.84 ×

4x

3.9x

3.8x

Capital asset turnover

2.20 ×

1.84x

2.5x

2.72x

Total asset turnover

1.46 ×

1.14x

2.5x

1.5x

Current ratio

2.15 ×

1.45x

1.78x

2.25x

Quick ratio

1.10 ×

0.8x

0.91x

1

Debt to total Assets

40.10%

55.4%

50.4%

45%

Times interest Earned

5.26 ×

3.17x

4.75x

5.67x

should anybody Purchase Shares in Lululim?

Homework Answers

Answer #1

No , one should not purchase shares in Lululim as when we observe the various ratios of the company the performance of the company has fallen each year. From liquidity ratios to solvency ratios to effiency ratios to profit ratios none has shown an upward trend except for inventory turnover ratio . Although a higher inventory turnover ratio is considered good but there is another facet to it . A high ITR may also indicates inadequate inventory level which may result in lower sales and hence revenue . Also the ratios vary a lot from the Industry average hence there is no point in purchasing the shares of Lululim company.

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