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Unformatted text preview: Week 8 CheckPoint 2: Interpreting Financial Ratios Â· Resource: Ch. 6 of Understanding Financial Statements Â· Due Date: Day 4 [Individual forum] Â· Complete Problem 6.2 on p. 230 (Ch. 6). Submit your answer in 200 to 300 words. From the data it is evident that Luna lighting has a modest increase in sales. This is shown by the inventory turn over, which has increased from 8.1 to 8.3 times and is equal to the industrial norm. The business has failed to achieve the levels of profitability that other businesses in the same industry have managed and there are several reasons to back this statement. Luna's gross margins of 43% throughout the three years are better than that of the industry but it seems that Luna is incurring a considerable amount of operating expenses as well as high interest costs, which might belong to debt taken for the medium to short term. This fact is backed up by the operating profit margin, which has fallen from 8 to 6.3% in two years. Such drastic falls This fact is backed up by the operating profit margin, which has fallen from 8 to 6....
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- Spring '11
- Financial Ratio, poorÂ debt/equityÂ mix, poorÂ debtÂ utilization