Scandi Home Furnishings

A.
2006-2007
Current Ratio = Current Assets/Current Liabilities
=(1,500,000/2) / (600,000/2)
= 2.5

Quick Ratio = (CA - Inventories)/CL =(1,500,000/2)-(950,000)/2)/(600,000)/2) = 0.92

NWC to Total Assets Ratio = (CA - CL)/Assets
=(1,500,000/2)-(600,000)/2)/(2,200,000/2)
= 40.9%

2007-2008
Current Ratio = Current Assets/Current Liabilities =(1,770,000/2) / (774,000)/2)
= 2.29

Quick Ratio = (CA - Inventories)/CL =(1,770,000/2)-(1,100,000/2))/(774,000)/2)
= 0.87

NWC to Total Assets Ratio = (CA - CL)/Assets
=(1,770,000/2)-(774,000/2)/(2,670,000/2)
= 37.3%

Liquidity is strong in both years but liquidity does appear to be weak from year to year.

B.

Conversion Period Ratio 2006-2007 2007-2008 Indicated Impact on Cash Conversion Cycle
Inventory-to-sale 192.6 days 159.3 days (33.3) (shortens C3)
Sale-to-cash 56.0 days 62.9 days 6.9 (lengthens C3)
Purcahse-to-payment 85.2 days 72.4 days (12.7) (shortens C3)
Cash conversion cycle (C3) 163.4 days 149.8 days (13.7) (shorter C3)

C. 2007 2008
Cash build 1,440,000 1,700,000
Cash burn 1,423,000 1,914,000
Net Cash build/cash burn 17,000 (214,000)

Cash burn has increased more than cash build due to the increase in the marketing expenses.
D.
2006-2007 2007-2008
Current Liability to Total Debt 46.15% 44.90%
Interest Coverage 5.26 2.00
Debt to Equity 1.55 2.09

The current liabilities are somewhat unchanged from year to year. The firm is utilizing total debt more than equity with earnings decreasing and interest increases.
E.
2007 2008
Gross Profit Margin 0.4 0.3
Operating Profit Margin 16.47% 4.44%
Net Profit Margin 7.60% 0.33%
NOPAT Margin 9.88% 2.67%

Profitability is has decreased significantly due to the increase in interest and expenses while, the gross profit margin has remained