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Unformatted text preview: = 0.6 times 5. Return on equity $150,000 ($1,325,000 + $160,000) / 2 = 20.2% Requirement 3 Regarding risk, Great Adventures appears to be in great shape. Liquidity is strong based on the receivable turnover ratio, current ratio, and acid-test ratio. They may be able to improve the inventory turnover ratio as the MU watches are in inventory an average of over 80 days. Profitability also looks good. The MU watches have a 40.7% mark-up. The return on assets and the return on equity are both respectable at 14.1% and 20.2%. Asset turnover is rather low, but so far they have been able to make up for it with a rather high profit margin. Exercise 12-14 a. Conservative (lower income, lower assets) b. Aggressive (higher income, higher assets) c. Conservative (lower income, lower assets) d. Aggressive (higher income, lower liabilities)...
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- Spring '08
- Management, Financial Ratio, inventory turnover ratio, receivable turnover ratio, Krannert School of Management, Purdue University Solutions