Autozone Case Study

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Table of Contents Executive Summary 2 Profitability Ratios 3 Profit Margin 3 Return on Assets 3 Return on Equity 3 Asset Utilization Ratios 3 Receivables Turnover 3 Average Collection Period 3 Inventory Turnover 3 Capital Asset Turnover 3 Total Asset Turnover 3 Liquidity Ratios 4 Current Ratio 4 Quick Ratio 4 Debt Utilization Ratios 4 Debt to Total Assets 4 Times Interest Earned 4 Conclusion and Recommendations 5 Appendix I: Ratios Analysis Results 6 Executive Summary The purpose of the report is to provide Wand Inc. a recommendation from the following choices: - 1. Grant short-term credit to Lululemon Athletica Inc. 2. Grant long-term credit to Lululemon Athletica Inc. 3.…show more content…
However, the Income Statement shows that the cost of goods sold and the operating costs have while the PM has declined making it unfavourable. The Sales are growing rapidly while the profit is dropping indicating efficiency problems in controlling costs as well as setting the right acceptable price to customers. 2. Return on assets (ROA) The ROA specifically measures how managers efficiently use assets to generate a profit. The higher the return, the more efficient management is in utilizing assets. Compared to Nike a business of similar product Lulu's ROA is considerably higher. In 2014 Lulu's ROA was recorded at 22.4% an all-time low for the past three years. This could potentially mean Lulu is not benefiting from some repeat sales. 3. Return on Equity (ROE) This ratio measures how much the shareholders earned (return) on their investment. Lulu’s ROE of 25.5% in 2014 shows investors how effective management employed the shareholder’s investment and returned $25.5 per $1 invested. Whilst the company’s ROE is 7.5% above the industry average in 2013, it has nevertheless dropped by 5% in 2014. This is consistent with a drop in ROA and debt to total assets ratios hence, confirming the trend in profit margins where they rose in 2013 and subsequently dropped in 2014. This ratio has a coherent relationship between PM and ROE. ASSET UTILIZATION RATIOS 1. Receivables Turnover (RT) This indicates
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