Case Questions: compare Lakeside calculations to the industry averages provided
ID: 2430815 • Letter: C
Question
Case Questions:
compare Lakeside calculations to the industry averages provided below:
RATIOS INDUSTRY AVERAGE 2008 LAKESIDE 2008
Current ratio 1.73.................................................................. 1.36
# Days inventory on hand 65 ...................................................................100.52
Receivables collection period 11 .......................................................................24.71
Debt-to-total assets 13% .....................................................................75%
Times interest earned 30 times ........................................................................2.79 times
Profit Margin 2.93% ......................................................................2.27%
Return on Assets 6.09% ......................................................................6.73%
** What is your overall assessment of the comparison of the ratios for Lakeside in 2008 as compared with the industry average?
Explanation / Answer
In terms of Current Ratio, Lakeside is having a current ratio of less than that of Industry average leading to maintenance of less proportion of current assets to current liabilities.
In terms of # Days inventory on hand; Receivables collection period; Debt-to-total assets; Times Interest earned the Company is having an adverse ratios when compared to the industry average.
The company need to improve in many ways to reach the industry averages as they are parameter of measuring the growth and market share of the compnay.