Management wants to determine some plans of action in several areas of the company to improve efficiency and overall value. The following ratios were observed:
Company Industry Average
Current Ratio 1.6 2.6
Net Profit Margin 6.5% 6.5%
Average Collection Period(ACP) 44 days 30 days
Total Asset Turnover 5.0 X 7.5 X
Debt Ratio 20% 40%
a) In which category of ratios does each of the ratios belong? Examples of a category of ratios is Liquidity, Activity, and so on.
b) For each category in part a, discuss the financial strength/weakness AND include some possible management action.