Fixed charge coverage (times): 5.4
Profitability:
- Gross profit margin (%): 54.4
- Operating profit margin (%): 64.8
- Net profit margin (%): 6.0
- Return on equity (%): 0.9
Which statement below is true with regard to the cash flow adequacy ratio of LA Theaters?
The cash flow adequacy ratio indicates that LA Theaters cannot cover all capital expenditures, debt repayments, and dividends with cash from operations in 2016 or 2015.
QUESTION 21
Use the following information for LA Theaters to answer the question:
Financial ratios for the years ended December 31.
- Times interest earned (times): 6.1
- Cash return on assets (%): 0.6
- Return on equity (%): 0.2
- Operating profit margin (%): 52.0
- Net profit margin (%): 3.0
- Cash return on assets (%): 4.3
- Return on equity (%): 7.0
Which statement below is true with regard to the profitability of LA Theaters?
LA Theaters has improved all profit margins most likely due to better cost control and/or increased prices, as well as a reduction of interest expense due to debt reduction.