*E24-6 (LO6) (Ratio Analysis) Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below. 2017 Edna Millay 2015 2016 Industry Average 2017 Current ratio 2.09 2.27 2.51 2.24 Quick ratio Inventory turnover Net sales to stockholders' equity Return on common stockholders' equity Total liabilities to stockholders' equity 1.15 1.12 1.19 1.22 2.40 2.18 2.02 3.50 2.71 2.80 2.99 2.85 0.14 0.15 0.17 0.11 1.41 1.37 1.44 0.95 Millay is being reviewed by several entities whose interests vary, and the company's financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Millay's financial position. Archibald MacLeish Bank. The bank is processing Millay's application for a new 5-year term note. Archibald MacLeish has been Millay's banker for several years but must reevaluate the company's financial position for each major transaction. Robert Lowell Company. Lowell is a new supplier to Millay and must decide on the appropriate credit terms to extend to the company. Robert Penn Warren. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter, Robert Penn Warren must decide if it will include Millay in a new fund being established for sale to Robert Penn Warren's clients. Working Capital Management Committee. This is a committee of Millay's management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the company's working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.
*E24-6 (LO6) (Ratio Analysis) Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below. 2017 Edna Millay 2015 2016 Industry Average 2017 Current ratio 2.09 2.27 2.51 2.24 Quick ratio Inventory turnover Net sales to stockholders' equity Return on common stockholders' equity Total liabilities to stockholders' equity 1.15 1.12 1.19 1.22 2.40 2.18 2.02 3.50 2.71 2.80 2.99 2.85 0.14 0.15 0.17 0.11 1.41 1.37 1.44 0.95 Millay is being reviewed by several entities whose interests vary, and the company's financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Millay's financial position. Archibald MacLeish Bank. The bank is processing Millay's application for a new 5-year term note. Archibald MacLeish has been Millay's banker for several years but must reevaluate the company's financial position for each major transaction. Robert Lowell Company. Lowell is a new supplier to Millay and must decide on the appropriate credit terms to extend to the company. Robert Penn Warren. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter, Robert Penn Warren must decide if it will include Millay in a new fund being established for sale to Robert Penn Warren's clients. Working Capital Management Committee. This is a committee of Millay's management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the company's working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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C) Discuss what the financial ratios presented in the question reveal about Millay. Support your answer by citing specific ratio levels and trends as well as the interrelationships between these ratios
Transcribed Image Text:*E24-6 (LO6) (Ratio Analysis) Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets
of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below.
2017
Edna Millay
2015
2016
Industry
Average
2017
Current ratio
2.09
2.27
2.51
2.24
Quick ratio
Inventory turnover
Net sales to stockholders' equity
Return on common stockholders' equity
Total liabilities to stockholders' equity
1.15
1.12
1.19
1.22
2.40
2.18
2.02
3.50
2.71
2.80
2.99
2.85
0.14
0.15
0.17
0.11
1.41
1.37
1.44
0.95
Millay is being reviewed by several entities whose interests vary, and the company's financial ratios are a part of the data being
considered. Each of the parties listed below must recommend an action based on its evaluation of Millay's financial position.
Archibald MacLeish Bank. The bank is processing Millay's application for a new 5-year term note. Archibald MacLeish has
been Millay's banker for several years but must reevaluate the company's financial position for each major transaction.
Robert Lowell Company. Lowell is a new supplier to Millay and must decide on the appropriate credit terms to extend to the
company.
Robert Penn Warren. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter,
Robert Penn Warren must decide if it will include Millay in a new fund being established for sale to Robert Penn
Warren's clients.
Working Capital Management Committee. This is a committee of Millay's management personnel chaired by the chief operating
officer. The committee is charged with the responsibility of periodically reviewing the company's working capital position,
comparing actual data against budgets, and recommending changes in strategy as needed.
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