The Elk Manufacturing Corporation makes and distributes tractors and combines to the Global Agricultural industry. The level of global commodity prices has remained stable for the past 5 years. The degree of competition in agricultural equipment industry has recently increased with companies from India and China now becoming larger "players".
Mr. Corn, the Chief Executive, of the Elk organization has just had a meeting with his CFO and needs some further clarification of the following ratios and whether they are relaying good or bad news to the senior management team of the company and ultimately the board of directors.
Please review each ratio and determine if they are signaling good or bad news to the CEO. In addition, briefly summarize your conclusion about the overall financial health of the Elk Corporation based on the financial ratios and your analysis.
A. Increase in the Profit Margin
B. Decrease in Inventory Turnover
C. Increase in the Current Ratio
D. Decrease in the Earnings Per Share
E. Increase in the Debt to Asset Ratio