Key Financial Ratio Analysis

Name : Blue Nile Key Financial Ratio Analysis (in thousands 2007 2006 2005 Analysis

Net Income 13064 13153 9987 Revenue 251587 203169 169242 Assets 122106 138005 128382 Equity 47303 81515 83620 Profit Margin Net Income /Revenue 5 .2 6 .5 5 .9

Drop in profitability from 2006 to 2007 Asset Turnover Revenue /Assets 2 .1 1 .5 1 .3

Increase in efficiency over last 2 years Equity Multiplier Assets /Equity 2 .6 1 .7 1 .5

Increase in leverage over last 2 years

ROA Profit Margin Asset Turnover (Net

Income /Assets ) 10 .7 9 .5 7 .8

Increase in ROA last 2 years

ROE ROA Equity Multiplier (Net Income /Equity ) 27 .6 16 .1 11 .9

Sharp increase in ROE over last 2 years Debt /Equity 1 .57 .68 .52

Sharp increase in Debt to Equity last year LT Debt /Cap .016 .011 .014

Sharp increase LT Debt to Capital last year LT Debt Drop in leverage in last 2 years LT Debt Drop in leverage in last 2 years Current Ratio Current Assets /Current Liabilities 1 .6 2 .4 2 .8

Liquidity shows a sharp drop in last year

Quick Assets Cash Receivables 42158 33149 30779

Quick Ratio Quick Assets /Current Liabilities 0 .57 0 .60 0 .70

Liquidity shows a drop over last 2 years Despite a steady increase in Revenue , Net Income has remained steady This is caused by a sharp increase in SG A and Inventory . Although Asset Turnover shows an increase in efficiency and Equity Multiplier shows an increase in leverage (resulting in an increase in Return on Assets and Return on Equity , LT Debt analysis shows a drop in leverage This may mean that Blue Nile is overextended . There has also been a sharp drop in profitability (Profit Margin ) and liquidity (Current Ratio and Quick Ratio . Coupled with Debt to Equity and Long Term Debt to Capital showing a sharp increase , it appears that debt has become unmanageable . Focus should be put toward reducing LT Debt and Liabilities before any additional investments in assets is considered...