4. The ratios for Harrod’s Sporting Goods look much better when the extraordinary loss has been removed from the equation. One can see how well the company is truly performing. The firm has experienced an increase in profit margin, return on asset, and return on equity for three consecutive years. Also, the total asset turnover ratio is exactly the same as before meaning it was not impacted by the extraordinary loss that lowered net income and previously effected the other ratios.
5. Harrod’s outperformed industry averages for 2003. Their profit margin was 1.68% higher than …show more content…
The sporting goods store collects on their receivable accounts almost as well as their industry peers. Harrod’s collects about 0.44 times slower than the industry. However, they turnover their inventory 1.74 times faster than others. Also, their fixed asset turnover is 0.43 times less than the industry. What I interpret this as is they have a higher volume of inventory, perhaps at a lower price, but still are able to collect just as much on their receivables as others in the market. They probably have higher sales since only half of the receivables are credit terms. The company is also using about as much of their fixed assets for their sales as others, so that small decrease from Harrod’s to industry average is not enough to effect overall company health or