Darlarma Furniture inc.

Financial Ratio Chart

Liquidity

2006

2007

2008

Industry average

Current ratio

2.525

2.135

1.688

2.5

Cash ratio

0.2

0.12

0.19

0.5

Asset Management

Inventory turnover in days

181

167

164

90

A/R turnover in days

61

63

76.6

60

A/P turnover in days

59.58

75

90

15

Cash conversion cycle

182

155

150

135

Fixed asset turnover ration

3.6

3.0

2.96

4.01

Total asset turnover ration

1.2

1.18

1.144

2.21

Long-Term Debt Paying Ability

Long-term debt to total capitalization

42%

47.17%

58.12%

30%

Cash flow coverage

-

-

-

3.21

Effective interest rate

-

-

-

8%

Maximum borrowing

-

-

-

-

Profitability

Gross profit margin

40%

36%

32%

45%

Operating profit margin

15.4%

13.56%

4.51%

25%

Net profit margin

8%

6%

0.4%

10%

ROA

10%

8%

0.4%

22%

ROE

10%

8%

0.4%

31%

Liquidity

The current ratio tells you how much Liquidity Company has in order to pay off its current liabilities. The industry average in which darlarrna furniture is operating is 2.5 times. Whereas, the record of darlarna's furniture are: in 2006 2.525 time, in 2007 2.135 times, in 2008 1.688 times. The overall performance of the company in 2006 and 2007 was equal according to the industry average. But in 2008 the company shoed poor performance and showed its current ratio below the industry average. It means that now the company is in poor conditions that it is not able to meet up its short term liabilities.

The cash ratio of the industry is 0.5. whereas, the performance of the company in terms of the cash ratio is very poor. The company performs below the industry average the stats of the company are: in 2006 0.2, in 2007 0.12, in 2008 0.19. This shows that company is unable to payoff its current liabilities quickly and it is dangerous to provide more loan to the company.

Asset Management

The industry average for inventory turnover is 90 days. Whereas performance of the company is very poor, in year 2006, the company's inventory turnover was 181 days which is twice of industry average. Although, the company's inventory turnover is decreasing and in 2008 the company's turnover showed the result of 164 days. This situation shows that the sales of the company is decreasing intead of decreasing. One of the reason is that company is taking more inventory because of discount offer from the suppliers and they are not meeting it according to their level of sales.

The account receivable turnover is also showing poor results. The industry benchmark was 60 days and the company is providing the credit facility to its customers beyond this. This means that the funds of the company are stuck up because of their customers.

The accounts payable turnover of the company shows good results. The company's accounts payable turnover is more than the industry benchmark, which means that company is hiring the funds from its creditors for more time period.

The fixed assets turnover of the company is below the industry average, ...