Barry Company Computed the Following Ratios for a Two-Year Period

Essay

Barry Company computed the following ratios for a two-year period: $$\begin{array} { | l | l | r | r | } \hline & \text { Ratio } & \underline { 20 X 1 } & \underline { 20X 2 } \\\hline \text { a. } & \text { Current ratio } & 1.3 \text { to } 1 & .6 \text { to } 1 \\\hline \text { b. } & \text { Return on equity } & 25 \% & 16 \% \\\hline \text { c. } & \text { Quality of earnings } & 1.7 & .5 \\\hline \text { d. } & \text { Cash coverage ratio } & 346 & 122 \\\hline \text { e. } & \text { Profit margin } & 6 \% & 4 \% \\\hline\end{array}$$ Required: Comment on the trend of each of the ratios from 20X1 to 20X2. State concerns or possible implications for the future of each.