QUESTION 4: Creditors would be most interested in which of the following ratios?
times interest earned |
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total asset turnover |
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current ratio |
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PE ratio |
QUESTION 6: Activity (turnover) ratios indicate the firm’s _________ ability.
liquidation |
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profit generating |
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debt servicing |
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sales generating |
QUESTION 7: Using the average inventory in the denominator of the inventory turnover ratio rather than using the year-end balance would be especially important for
a firm with seasonal sales |
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a firm with a high level of debt |
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a company that has multiple business divisions |
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a service firm |
Answer 4:- Current Ratio
Explanation:- Creditors are most interested in liquidity ratios because they provide the best information on the cash flow of a company and measure its ability to pay its current liabilities or the money which a company owes to its creditors and the current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. Hence, Creditors would be most interested in it.
Answer 6:- Sales generating
Explanation:- Activity ratios measure the efficiency of a business in using and managing its resources to generate maximum possible revenue. It measures company's sales per another asset account—the most common asset accounts used are accounts receivable, inventory, and total assets. Hence, turnover ratios indicate the firm’s sales generating ability.
Answer 7:- a firm with seasonal sales
Explanation:- The need of using average inventory is especially important for a firm that experiences seasonality. In such a case, many retailers build inventory levels during specific periods to prepare for sales during the holiday season. So, using average inventory helps in providing more accurate picture.
QUESTION 4: Creditors would be most interested in which of the following ratios? times interest earned...
QUESTION 6: Activity (turnover) ratios indicate the firm’s _________ ability. liquidation profit generating debt servicing sales generating
QUESTION 7: Using the average inventory in the denominator of the inventory turnover ratio rather than using the year-end balance would be especially important for a firm with seasonal sales a firm with a high level of debt a company that has multiple business divisions a service firm
QUESTION 14: Which of the following ratios would be most useful to a creditor to determine an ongoing concern’s (ongoing company’s) creditworthiness? current ratio quick ratio total asset turnover times interest earned QUESTION 21: Trico Windshield Wipers Corporation has a 24% return on equity. The debt ratio is 35%. If the total asset turnover is 1.5X, what is the firm's profit margin? 13.85% 11.31% 14.25% 10.40% none of these
3. Debt (or leverage) management ratiosCompanies have the opportunity to use varying amounts of different sources of financing, including internal and external sources, to acquire their assets, debt (borrowed) funds, and equity funds.Company A uses long-term debt to finance its assets, and company B uses capital generated from shareholders to finance its assets. Which company would be considered a financially leveraged firm?Company ACompany BWhich of the following is true about the leveraging effect?Under economic growth conditions, firms with relatively more leverage...
Which of the following financial ratios would be most useful to an auditor seeking information on a company’s ability to sustain losses? Multiple Choice Inventory turnover Earnings per share Debt to equity Days’ sales in accounts receivable
DuPONT ANALYSIS A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $2 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Industry Average Ratios Current ratio 3.34x Fixed assets turnover 7.44x Debt-to-capital ratio 19.28% Total assets turnover 3.70x Times interest earned 35.45x Profit margin 12.64% EBITDA...
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In general, which of the following statements is correct about different ratios? Group of answer choices Low current ratio is beneficial for hospitality companies so that they can pay their current liabilities. Creditors are interested in low ratios of interest coverage. A firm is called “solvent” when its total liabilities exceed its total assets. A high inventory turnover is desired because it means that the establishment is able to operate with strong sales volume and efficient buying.
Cadux Candy Company’s income statement for the year ended December 31, 2021, reported interest expense of $12 million and income tax expense of $122 million. Current assets listed in its balance sheet include cash, accounts receivable, and inventory. Property, plant, and equipment is the company’s only noncurrent asset. Financial ratios for 2021 are listed below. Profitability and turnover ratios with balance sheet items in the denominator were calculated using year-end balances rather than averages. Debt to equity ratio 0.7 Current...
QUESTION 14 Which of the following ratios is purely a performance ratio? current ratio times interest earned ratio return on assets ratio debt to assets ratio (debt ratio)