Question 6 (this question has 2 parts) Gordon Industries Ltd has provided you with the following information: 2019 2020 2021 Debt to Equity 10.5% 23.4% 36.2% Gross Profit margin 30.2% 36.5% 35.3% Net profit margin 19.5% 17.6% 13% Return on Equity 15.1% 17.5% 16.2% Asset Turnover (times) 0.71 0.82 1.41 Return on Assets 13.8% 14.4% 18.3% Interest coverage ratio 4 times 3 times 2.5 times a) Advise Gordon Industries of the relationship between Return on Assets, Asset Turnover and Net Profit Margin. Comment on the profitability position of Gordon and any advice you consider relevant. b) Advise the shareholders of Gordon Industries on the financial structure of the company.
Question 6 (this question has 2 parts) Gordon Industries Ltd has provided you with the following information: 2019 2020 2021 Debt to Equity 10.5% 23.4% 36.2% Gross Profit margin 30.2% 36.5% 35.3% Net profit margin 19.5% 17.6% 13% Return on Equity 15.1% 17.5% 16.2% Asset Turnover (times) 0.71 0.82 1.41 Return on Assets 13.8% 14.4% 18.3% Interest coverage ratio 4 times 3 times 2.5 times a) Advise Gordon Industries of the relationship between Return on Assets, Asset Turnover and Net Profit Margin. Comment on the profitability position of Gordon and any advice you consider relevant. b) Advise the shareholders of Gordon Industries on the financial structure of the company.
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
22nd Edition
ISBN:9781305666160
Author:James A. Heintz, Robert W. Parry
Publisher:James A. Heintz, Robert W. Parry
Chapter15: Financial Statements And Year-end Accounting For A Merchandising Business
Section: Chapter Questions
Problem 4CE
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Question 6 (this question has 2 parts)
Gordon Industries Ltd has provided you with the following information:
|
2019 |
2020 |
2021 |
Debt to Equity |
10.5% |
23.4% |
36.2% |
Gross Profit margin |
30.2% |
36.5% |
35.3% |
Net profit margin |
19.5% |
17.6% |
13% |
Return on Equity |
15.1% |
17.5% |
16.2% |
Asset Turnover (times) |
0.71 |
0.82 |
1.41 |
Return on Assets |
13.8% |
14.4% |
18.3% |
Interest coverage ratio |
4 times |
3 times |
2.5 times |
a) Advise Gordon Industries of the relationship between Return on Assets, Asset Turnover and Net Profit Margin. Comment on the profitability position of Gordon and any advice you consider relevant.
b) Advise the shareholders of Gordon Industries on the financial structure of the company.
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