Case Study: Is Elite Furniture Co. Actually Doing Well?
Elite Furniture Co. grew its revenue this year compared to last year — on paper, that sounds like good news. But the CFO wants your take: is the company actually in better shape, or is something concerning hiding beneath the surface?
The data (last year vs. this year)
| Item | Last Year | This Year |
|---|---|---|
| Revenue | EGP 3,000,000 | EGP 3,300,000 |
| COGS | EGP 1,800,000 | EGP 2,200,000 |
| Net Income | EGP 300,000 | EGP 250,000 |
| Current Assets | EGP 900,000 | EGP 950,000 |
| Inventory | EGP 300,000 | EGP 380,000 |
| Current Liabilities | EGP 500,000 | EGP 700,000 |
| Total Debt | EGP 400,000 | EGP 650,000 |
| Total Equity | EGP 1,000,000 | EGP 1,050,000 |
| Operating Cash Flow | EGP 320,000 | EGP 180,000 |
What’s required
- Download the blank Excel template and calculate, for each year: gross margin, net margin, current ratio, quick ratio, debt-to-equity, and the earnings quality ratio (operating cash flow ÷ net income).
- Compare each ratio between the two years — what improved, and what deteriorated?
- Write a sentence or two: is Elite Furniture actually in better shape, or did revenue simply grow while financial health quietly declined?
- Compare your work to the downloadable “solved model” file.
- Test your understanding on the quiz page.
Tip: use the interactive ratio lab in lesson three if you want to double-check any formula before typing it into Excel.