Developed the ratio calculations and industry comparisons

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Reference no: EM13899471

Luna Lighting, a retail firm, has experienced modest sales growth over the past three years but has had difficulty translating the expansion of sales into improved profitability. Using three years' financial statements, you have developed the following ratio calculations and industry comparisons. Based on this information, suggest possible reasons for Luna's profitability problems.

Industry Averages	2013	2012	2011	2013
Current	2.3X	2.3X	2.2X	2.1X
Average collection period	45 days	46 days	47 days	50 days
Inventory turnover	8.3X	8.2X	8.1X	8.3X
Fixed asset turnover	2.7X	3.0X	3.3X	3.5X
Total asset turnover	1.1X	1.2X	1.3X	1.5X
Debt ratio	50%	50%	50%	54%
Times interest earned	8.1X	8.2X	8.1X	7.2X
Fixed charge coverage	4.0X	4.5X	5.5X	5.1X
Gross profit margin	43%	43%	43%	40%
Operating profit margin	6.3%	7.2%	8.0%	7.5%
Net profit margin	3.5%	4.0%	4.3%	4.2%
Return on assets	3.7%	5.0%	5.7%	6.4%
Return on equity	7.4%	9.9%	11.4%	11.8%

Reference no: EM13899471

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