Question

When analyzing financial statements, which ratio calculation measures business liquidity ___________________________________ When analyzing financial statements, what...

  1. When analyzing financial statements, which ratio calculation measures business liquidity ___________________________________

  1. When analyzing financial statements, what can you conclude when the inventory turnover ratio increases from 4.0 to 6.0 over a three year period.
    1. The day’s inventory held are within the typical industry average
    2. The day’s inventory held has increased over time
    3. The day’s inventory held has decreased over time

  1. When analyzing financial statements, what can you conclude when the accounts receivable turnover ratio decreases from 9.0 to 6.0 over a three year period.
    1. Collections are within standard terms
    2. The collection period has increased over time
    3. The collection period has decreased over time
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The ratio which helps meaures the business liquidity is :

Current ratio and quick ratio.

The inventory turnover ratio has increased from 4 to 6, which shows that the inventory is tied up for less number of days and is being used efficiently to generate higher sales. So, the days inventory held decreased over time.

So, the correct option is option C.

Average receivables turnover decraeses form 9 to 6. Net credit Sales/ average accounts receivables

This indicates that the collection period has increases over time. The company has clients that is making payments delinquently.

So, the correct option is option B.

So, the c

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following does not indicate increasing overall liquidity? A) an increasing current ratio B)...
Which of the following does not indicate increasing overall liquidity? A) an increasing current ratio B) an increasing quick ratio C)an increasing cash flow liquidity ratio D) an increasing cash conversion cycle What is the relationship between the average collection period and accounts receivable turnover?       When average collection period increases, the accounts receivable turnover decreases.       Both ratios are expressed in number of days.       Both ratios are expressed in number of times receivables are collected per year.       All of the above...
Exercise 6-49 (Algorithmic) Analyzing Inventory Examining the recent financial statements of McLelland Clothing, Inc., you note...
Exercise 6-49 (Algorithmic) Analyzing Inventory Examining the recent financial statements of McLelland Clothing, Inc., you note the following: Sales $754,693 Cost of goods sold 506,700 Average inventory 76,900 Required: Calculate McLelland's gross profit ratio, inventory turnover ratio, and assuming a 365-day year, the average days to sell inventory. (Use two decimal places for gross profit ratio and average days to sell inventory, three decimal places for inventory turnover ratio.) Gross profit ratio   % Inventory turnover ratio Average days to sell...
What four financial statements are contained in most annual reports? Why would the inventory turnover ratio...
What four financial statements are contained in most annual reports? Why would the inventory turnover ratio be more important for someone analyzing a grocery store chain than an insurance company?
Suppose you manage a company, which presents the following financial indicators: Current Ratio: 2 Average Collection...
Suppose you manage a company, which presents the following financial indicators: Current Ratio: 2 Average Collection Period: 76.3 días Inventory Turnover: 6.7 Operating Income Return on Investment: 13.2% Debt Ratio: 32% The competition has the following results: Current Ratio: 2 Average Collection Period: 35 days Inventory Turnover: 6.7 Operating Income Return on Investment:10% Debt Ratio: 60% How is the financial situation of your company? Please argue your answer.
When reviewing a company’s financial statements, the primary concern for a creditor is the company’s liquidity....
When reviewing a company’s financial statements, the primary concern for a creditor is the company’s liquidity. True False During a period when unit costs are increasing, the FIFO method of valuing inventory costs will produce a lower net income than the LIFO method. True False The balance sheet includes assets, liabilities and stockholders' equity as of a point in time. True False Which of the following would not typically be disclosed in the notes to the financial statements? The net...
An auditor has determined that a client’s ‘days in receivables’ ratio has slowly increased over the...
An auditor has determined that a client’s ‘days in receivables’ ratio has slowly increased over the last three years. Which of the following could be a possible reason for this? A. The client has hired a collection agency which is extremely efficient at collecting. B. The receivables have been secured as collateral for a recent capital asset purchase. C. The accounts receivable department has implemented a new IT system, making collections much quicker and more efficient. D. The accounts receivable...
Which of the following statements is CORRECT? Select one: a. The days sales outstanding ratio tells...
Which of the following statements is CORRECT? Select one: a. The days sales outstanding ratio tells us how long it takes, on average, to collect after a sale is made. The account collection period (ACP) can be compared with the firm's credit terms to get an idea of whether customers are paying on time. Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-assets ratio was 67.5%....
Which of the following statements is CORRECT? a. In general, it's better to have a low...
Which of the following statements is CORRECT? a. In general, it's better to have a low inventory turnover ratio than a high one, as a low one indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. b. The more conservative a firm's management is, the higher the firm's total debt to total capital ratio is likely to be. c. A decline in...
Using the information on your August financial statements calculate the following ratios for your company using...
Using the information on your August financial statements calculate the following ratios for your company using an Excel spreadsheet: Gross Profit Percentage Accounts Receivable Turnover Ratio Day’s Sales in Receivables Debt Ratio Debt to Equity Ratio Profit Margin Ratio Rate of Return on Total Assets Asset Turnover Ratio Show the information in your spreadsheet in three columns: Ratio Name                                                                 Formula/Amounts                   Ratio Value Gross Profit Percentage Accounts Receivable Turnover Ratio Day’s Sales in Receivables Debt Ratio Debt to Equity Ratio Profit Margin Ratio...
Measures of liquidity, Solvency and Profitability The comparative financial statements of Marshall Inc. are as follows....
Measures of liquidity, Solvency and Profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 51 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1    20Y2    20Y1 Retained earnings, January 1 $ 3,647,550 $ 3,100,450 Net income 772,800 635,000 Total $ 4,244,550 $ 3,735,450 Dividends On preferred stock $ 10,500 $ 10,500 On common stock 77,400 77,400 Total dividends...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT