Question

QUESTION 8: Receivables turnover, inventory turnover and gross margin would be critical measures for what type of firm?

		an electric utility compaany
		a service firm
		a merchandising firm
		an architectural firm

QUESTION 10: The higher the equity multiplier, the better.

True

False

QUESTION 11: The ratio that indicates the firm’s ability to use assets to generate operating profit is the

		basic earning power
		equity multiplier
		return on equity
		days sales outstanding

Answer 1

QUESTION 8

Since the Merchandising cos have the invesntory and they do the business on credit. They are more concerned with Receivables turnover, inventory turnover and gross margin.

Option C is correct.

Answer 10

The Equity multiplier is lower the better and vice- versa.

The statement is false.

Answer 11)

Basic Earning power = EBIT / Total Assets

Option A is correct.

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