AEM 323 Managerial Accounting January 31, 2008 PacSun vs. AEOS Point of Interest Analysis – AEOS – • Very high financial leverage percentage in comparison to the market average. Utilized company debt as a tool to increase resources that generate more profit. • Lower than market average fixed asset turnover. Less effective at utilizing fixed assets to generate more revenues for shareholders. Can increase by increasing sales volume or decreasing less productive assets. • Return on Equity was much higher than the industry average. The firm had a very effective overall business strategy. The firm earned a profit for every dollar of the stockholder’s investment. • Outstanding profit margin. High percentage of sales dollars are converted to profit. Increased by increasing sales volume, sales price, or decreasing expenses. • Higher than average inventory turnover ratio. Inventory moves quickly through production process to the ultimate consumer. • Somewhat high current ratio. Suggests inefficient use of resources.
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