Question

Question 7 of 21Financial ratio data is listed below forGallery of Dreams. Select the answers that are strengths for thefirm after analyzing the ratios.

Gallery of Dreams Ratios
Ratio	Industry	2015	2014	2013
Current	2.50x	4.48x	4.06x	3.48x
Quick	0.80x	1.47x	1.18x	0.96x
Average collection period	11 days	16 days	15 days	9 days
Inventory turnover	2.30x	1.19x	1.24x	1.37x
Days payable outstanding	15 days	11 days	12 days	8 days
Fixed asset turnover	17.50x	9.74x	9.09x	8.85x
Total asset turnover	2.80x	1.50x	1.67x	1.82x
Debt ratio	62.00%	29.47%	34.04%	39.17%
Long term debt to total capitalization	25.53%	14.09%	18.91%	22.33%
Times interest earned	9.93x	22.02x	19.00x	14.23x
Fixed charge coverage	8.69x	4.59x	4.47x	4.25x
Gross profit margin	31.10%	59.21%	59.39%	58.52%
Operating profit margin	8.06%	22.05%	21.86%	20.52%
Net profit margin	4.32%	11.89%	11.00%	10.97%
Return on investment	9.21%	17.97%	18.28%	18.35%
Return on equity	11.34%	24.14%	27.51%	29.88%

(Points : 12)

Inventoryturnover is below industry average and is extremely low indicatingthe firm does not move inventory well
Profitability isexcellent with gross, operating and net profit margins aboveindustry average and increasing all years with the exception ofgross profit margin which decreased slightly in 2015
Interest is coveredby profits as are lease payments and the number of times coveredhas increased each year
The averagecollection period is increasing and is now above industryaverage
Current and quickratios are above industry average and increasing
Accounts payableare paid in a timely manner