Harvard University - MGMT 1000Module 6 Coursework Module 6 Case Questions Comfy Homes & Elegant Deco

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Answer #1: Comfy Home Ratios a Gross Profit Ratio 0.40 b EBIAT 154.05 c Days Inventory 121.00 d Average Collection Period 70.30 e Days Purchases Outstanding 60.07 f Leverage 1.918 g Debt to Eq... uity 0.918 h Asset Turnover 1.603 i Cash Conversion Cycle 131.23 j Interest Coverage Ratio 12.34 Elegant Deco Ratios a Gross Profit Ratio 0.463 b EBIAT 240.16 c Days Inventory 108.03 d Average Collection Period 32.44 e Days Purchases Outstanding 34.47 f Leverage 2.548 g Debt to Equity 1.548 h Asset Turnover 1.248 i Cash Conversion Cycle 106.00 j Interest Coverage Ratio 3.73Answer #2: a) The best profit margin? Comfy Homes (Profit Margin = 12%) b) The lowest days inventory? Elegant Deco c) The highest leverage? Elegant Deco d) The most advantageous cash conversion cycle? Elegant Deco e) The lowest accounts receivable turnover? Comfy Homes (Accounts Receivable Turnover = 5.19) f) The highest liquidity? Comfy Homes (Current Ratio = 2.51) Answer #3: Better (increase) the Accounts Receivables Turnover Ratio - A high ratio would indicate more efficient operations in the business with timely and increased cash collection. Reduce Cash Conversion Cycle - A lower cycle would indicate better benefits for the company in terms of increased cash flow. Answer #4: b) Raise additional equity capital c) Sell equity in the business at book value d) Sell plant, property & equipment and use the cash to pay off creditors h) Increase net profits (and thereby retained earnings) [Show More]

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