FNCE 3001 Week 3 Financial Ratio Analysis Example

Eight Ratios for Juniper Peak Sports, Fiscal 2025 Against Fiscal 2024: Liquidity Holding Steady, Inventory Turning More Slowly, Debt Falling and Margins Slipping

Student Name

Walden University

FNCE 3001: Financial Management

Instructor Name

Month Day, Year

Eight Ratios for Juniper Peak Sports, Fiscal 2025 Against Fiscal 2024: Liquidity Holding Steady, Inventory Turning More Slowly, Debt Falling and Margins Slipping

Scope and Sources

This analysis computes eight ratios for Juniper Peak Sports, the composite ski and outdoor retailer from Week 2, from its fiscal 2025 annual report, and compares each with the same ratio for fiscal 2024. The prior year is the comparison throughout, because the company's own history is the benchmark most directly affected by management's choices. Inputs come from the consolidated income statement and balance sheet, in thousands of dollars; year-end balances are used rather than averages, which the analysis notes where it matters.

The Ratios

Table 1

Juniper Peak Sports Selected Ratios, Fiscal 2025 and Fiscal 2024

Composite company. Year-end balances. Total debt is the term loan, including its current portion: $12,000 thousand in fiscal 2025 and $13,500 thousand in fiscal 2024.

Liquidity

The current ratio rose slightly, from 2.01 to 2.07: current assets of $24.8 million against current liabilities of $12.0 million. Read alone, that looks like stronger liquidity. The quick ratio says otherwise. It fell from 0.54 to 0.46, because cash dropped from $4.1 million to $3.2 million while inventory rose from $15.8 million to $18.6 million. The current ratio improved only because inventory, the least liquid current asset, grew. The claim: Juniper Peak's ability to pay near-term bills without selling stock weakened in fiscal 2025, even though the headline ratio suggests the opposite (Brigham & Houston, 2022).

Activity

Inventory turnover slowed from 2.91 to 2.71 times a year, so a typical item now waits about 135 days for a buyer, against 125. The cause is visible in the statements: inventory rose 17.7 percent while cost of goods sold rose 9.5 percent. The notes mention unsold ski equipment carried into spring. Days sales outstanding rose from 8.9 to 10.0 days. For a retailer that sells mostly by card, receivables are small, and the increase reflects a larger team-sales program with schools and clubs that pay on invoice. Fridson and Alvarez (2022) caution that a slowing turnover ratio deserves a look at the inventory notes before any conclusion is drawn, and here the notes confirm the cause. The claim: the company is tying up more money in goods it has not yet sold, and the inventory build, not receivables, is the main reason cash fell.

Debt and Coverage

Debt to equity fell from 0.69 to 0.50. Two things moved it: the company repaid $1.5 million of its term loan, and equity grew by $4.2 million as net income was retained after a small dividend. Times interest earned edged up from 7.7 to 7.9, since interest fell faster than operating income. The claim: Juniper Peak is less dependent on borrowed money than a year ago and covers its interest comfortably, which leaves room to borrow if a good investment appears.

Profitability

Net profit margin fell from 6.2 to 5.6 percent, mostly because gross margin slipped from 41 to 40 percent on ski discounting. Return on equity fell more sharply, from 24.7 to 19.7 percent. About half of that drop is lower profit and about half is the larger equity base: the same profit spread over more owners' capital gives a lower return. The DuPont framework separates these effects by writing return on equity as margin times asset turnover times the equity multiplier, and here the equity multiplier fell from 2.18 to 1.95 as debt was repaid (Ross et al., 2022). The claim: roughly half of the decline in return on equity reflects a safer balance sheet rather than weaker operations, but the margin decline is a real weakening.

What the Ratios Say Together

Liquidity and the debt ratios moved in opposite directions: the company owes less, but holds less cash and more slow-moving stock. The single most important finding is the inventory build, which explains the fall in the quick ratio, the slower turnover and much of the drop in cash. If the company clears the excess ski stock this spring, most of the weaker ratios should recover within a year; if it does not, the inventory problem will start to show in the margin as well. A comparison with a published industry median would strengthen these claims; without one, the analysis can say only that the company changed, not whether it is strong or weak for a sporting goods retailer.

References

Brigham, E. F., & Houston, J. F. (2022). Fundamentals of financial management (16th ed.). Cengage Learning.

Fridson, M., & Alvarez, F. (2022). Financial statement analysis: A practitioner's guide (5th ed.). Wiley.

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of corporate finance (13th ed.). McGraw Hill.