Certain financial ratios for Elizabeth Arden for its most recent year below, along with the average ratios for its industry. Based on those ratio
a. Does Arden seem to prefer to finance its assets with debt or with equity? How can i tell? What percent of its assets are funded with debt? What percent of its assets are funded with equity?
b. A supplier to a Arden sells merchandise to Arden and asks to be paid within 60 days. While any of Arden's financial ratios might be of interest to the supplier, which of the ratios listed below do you think would likely be the most important one to the supplier? Why?
c. Which of the ratios presented suggest that, compared to its industry, Arden may have a problem controlling its operating expenses? How can you tell. Your answer should clearly indicate that you understand why the ratio that you chose answers this question.
Here is the data for Elizabeth Arden and its industry.
Financial Ratios Elizabeth Arden Industry
Current ratio 2.1 0.9
Quick ratio 0.9 0.5
Inventory turnover 2.1 X 5.8 X
Operating profit margin 7.0% 13.0%
Debt ratio 31.5% 25.9%
Return on equity 5.6% 17.4%