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Reeds Ratios compared with industry standards

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Calculate a few ratios and compare Reed's results with industry averages. What do these ratios indicate?

Liquidity Ratios Industry
Current ration 2.7
Quick ratio 1.6
Receivables turnover 7.7
Average collection period 47.4

Efficiency Ratios
Total asset turnover 1.9
Inventory turnover 7.0
Payable turnover 15.1

Profitability Ratios
Gross profit margin 33.0
Net profit margin 7.8
Return on common equity 25.9

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Solution Summary

Reed ratios compared with industry standards are examined.

Solution provided by:
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
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