The Clothes Clutch, a retail clothier, has had average sales of $400,000 for the last five years, 2018-2022. The firm's total assets at the end of 2020 were $400,000. An internal staff cost analyst has prepared the following financial data from the annual reports. You have been hired as a consultant to help analyze the financial position. 2022 2021 2020 2019 2018 Current Ratio 2.80 2.43 2.36 2.10 2.00 Acid Test Ratio 2.03 1.93 1.82 1.61 1.47 Days' Sales in Receivables 61 58 54 42 35 Merchandise Inventory Turnover 4.20 4.10 4.10 3.90 3.70 Debt Ratio 0.48 0.50 0.49 0.47 0.47 Times Interest Earned 4.60 4.80 5.90 5.70 6.00 Sales as a Percent of 1996 Sales 1.46 1.23 1.12 1.06 1.00 Net Income as a Percent of 1998 Income 1.31 1.20 1.10 1.06 1.00 Gross Profit Margin 38.5% 38.8% 38.9% 40.0% 39.7% Operating Expenses to Net Sales 11.4% 11.3% 11.5% 11.4% 11.7% Net Profit Margin 7.6% 8.6% 8.9% 9.4% 9.3% Return on Total Assets 9.4% 9.6% 9.6% 10.0% 10.7% Briefly describe the trend in the long-term, debt-paying ability of The Clothes Clutch. Explain the cause(s) of this trend.
The Clothes Clutch, a retail clothier, has had average sales of $400,000 for the last five years, 2018-2022. The firm's total assets at the end of 2020 were $400,000. An internal staff cost analyst has prepared the following financial data from the annual reports. You have been hired as a consultant to help analyze the financial position. 2022 2021 2020 2019 2018 Current Ratio 2.80 2.43 2.36 2.10 2.00 Acid Test Ratio 2.03 1.93 1.82 1.61 1.47 Days' Sales in Receivables 61 58 54 42 35 Merchandise Inventory Turnover 4.20 4.10 4.10 3.90 3.70 Debt Ratio 0.48 0.50 0.49 0.47 0.47 Times Interest Earned 4.60 4.80 5.90 5.70 6.00 Sales as a Percent of 1996 Sales 1.46 1.23 1.12 1.06 1.00 Net Income as a Percent of 1998 Income 1.31 1.20 1.10 1.06 1.00 Gross Profit Margin 38.5% 38.8% 38.9% 40.0% 39.7% Operating Expenses to Net Sales 11.4% 11.3% 11.5% 11.4% 11.7% Net Profit Margin 7.6% 8.6% 8.9% 9.4% 9.3% Return on Total Assets 9.4% 9.6% 9.6% 10.0% 10.7% Briefly describe the trend in the long-term, debt-paying ability of The Clothes Clutch. Explain the cause(s) of this trend.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The Clothes Clutch, a retail clothier, has had average sales of $400,000 for the last five years, 2018-2022. The firm's total assets at the end of 2020 were $400,000. An internal staff cost analyst has prepared the following financial data from the annual reports. You have been hired as a consultant to help analyze the financial position.
| 2022 | 2021 | 2020 | 2019 | 2018 | |
| 2.80 | 2.43 | 2.36 | 2.10 | 2.00 | |
| Acid Test Ratio | 2.03 | 1.93 | 1.82 | 1.61 | 1.47 |
| Days' Sales in Receivables | 61 | 58 | 54 | 42 | 35 |
| Merchandise Inventory Turnover | 4.20 | 4.10 | 4.10 | 3.90 | 3.70 |
| Debt Ratio | 0.48 | 0.50 | 0.49 | 0.47 | 0.47 |
| Times Interest Earned | 4.60 | 4.80 | 5.90 | 5.70 | 6.00 |
| Sales as a Percent of 1996 Sales | 1.46 | 1.23 | 1.12 | 1.06 | 1.00 |
| Net Income as a Percent of 1998 Income | 1.31 | 1.20 | 1.10 | 1.06 | 1.00 |
| Gross Profit Margin | 38.5% | 38.8% | 38.9% | 40.0% | 39.7% |
| Operating Expenses to Net Sales | 11.4% | 11.3% | 11.5% | 11.4% | 11.7% |
| Net Profit Margin | 7.6% | 8.6% | 8.9% | 9.4% | 9.3% |
| Return on Total Assets | 9.4% | 9.6% | 9.6% | 10.0% | 10.7% |
Briefly describe the trend in the long-term, debt-paying ability of The Clothes Clutch. Explain the cause(s) of this trend.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education