Question: Of the financial ratios that are used for the industrystandard, which do you feel are most important when determiningwhether First United should approve the loan to Milan Fashions?What do you feel are the strong and weak points of thecompany in your financial analysis?
Industry Financial Ratio Standards
Ratio | Industry Norm | Milan Fashions Ratios2015 | Evaluation* |
Current ratio | 4.5 times | 13.25 | Good |
Long-term debt-to-Equity ratio | 12% | 5.36% | Good |
Debt-to-Equity ratio | 30% | 10.08% | Good |
Total Debt ratio | 20% | 9.16% | Good |
Financial leverage ratio | 1.10 | 1.1 | Fair |
Inventory turnover | 7 times | 6 times | Poor |
Fixed asset turnover | 1.8 times | 2.99 times | Good |
Debt-to-Capital ratio | 43.4% | 10.32% | Good |
Interest coverage ratio | 5.0 times | 18 times | Good |
Return on Assets | 8.4% | 2.15% | Poor |
Ratio | Industry Norm | Milan Fashions Ratios2016 | Evaluation* |
Current ratio | 4.5 times | 21.54 | Good |
Long-term debt-to-Equity ratio | 12% | 6.92% | Good |
Debt-to-Equity ratio | 30% | 9.86% | Good |
Total Debt ratio | 20% | 8.97% | Good |
Financial leverage ratio | 1.10 | 1.1 | Fair |
Inventory turnover | 7 times | 6 times | Poor |
Fixed asset turnover | 1.8 times | 2.6 times | Good |
Debt-to-Capital ratio | 43.4% | 10.17% | Good |
Interest coverage ratio | 5.0 times | 20 times | Good |
Return on Assets | 8.4% | 2.22% | Poor |
*Possible ratings: Good (Highest);Fair (Middle); Poor (Lowest)
