Interpreting Financial Ratios of Luna Lighting
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Solution Summary
The solution interprets the financial success of Luna Lighting based upon financial ratio analysis.
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Considering the current ratio, it is growing away from the industry average of 2.1 times. This indicates that the firm might be too high in current assets. Current assets include cash and cash equivalents, accounts receivables, and inventory. Drilling down, we see that the average collection period is 45 days versus an industry average 50 days. This indicates that accounts receivables are likely not too high. In addition, inventory turnover is right in line with the industry. As a ...
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