Chapt 3
-If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, which ratios would each group be most interested in, and for what reasons?
-If the accounts receivable turnover ratio is decreasing, what will be happening to the average collection period?
– Inflation can have significant effects on income statements and balance sheets, and therefore on the calculation of ratios. Discuss the possible impact of inflation on the following ratios, and explain the direction of the impact based on your assumptions.
a . Return on investment
b. Inventory turnover
c. Fixed asset turnover
d.Debt-to-assets ratio
-Comparisons of income can be very difficult for two companies even though they sell the same products in equal volume. Why?
-Low Carb Diet Supplement, Inc., has two divisions. Division A has a profit of $100,000 on sales of $2,000,000. Division B is only able to make $25,000 on sales of $300,000. Based on the profit margins (returns on sales), which division is superior?
-Polly Esther Dress Shops, Inc., can open a new store that will do an annual sales volume of $960,000. It will turn over its assets 2.4 times per year. The profit margin on sales will be 7 percent. What would net income and return on assets (investment) be for the year?