Ch3-Concepts Review and Critical Thinking Questions

pdf

School

Douglas College *

*We aren’t endorsed by this school

Course

2340

Subject

Management

Date

Apr 3, 2024

Type

pdf

Pages

2

Uploaded by JusticeOtter23683

Report
CHAPTER 3 Concepts Review and Critical Thinking Questions 1. (LO3) What effect would the following actions have on a firm’s current ratio? Assume that net working capital is positive. a. Inventory is purchased. b. A supplier is paid. ¢. A short-term bank loan is repaid. d. A long-term debt is paid off early. e. A customer pays off a credit account. /. Inventory is sold at cost. 2. Inventory is sold for a profit. 2. (LO3) In recent years, Cheticamp Co. has greatly increased its current ratio. At the same time, the quick ratio has fallen. What has happened? Has the liquidity of the company improved? 3. (LO3) Explain what it means for a firm to have a current ratio equal to .50. Would the firm be better off if the current ratio were 1.50? What if it were 15.0? Explain your answers. 4. (LO3) Fully explain the kind of information the following financial ratios provide about a firm: a. Quick ratio b. Cash ratio c. Interval measure d. Total asset turnover e. Equity multiplier f. Long-term debt ratio 2. Times interest earned ratio h. Profit margin i. Return on assets J- Return on equity k. Price-earnings ratio 5. (LO2) What types of information do common-size financial statements reveal about the firm? What is the best use for these common-size statements? What purpose do common-base year statements have? When would you use them? 6. (LO3) Explain what peer group analysis means. As a financial manager, how could you use the results of peer group analysis to evaluate the performance of your firm? 7. (LO4) Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals as compared to ROE considered by itself. Continued on the next page
8. (LO3) Specialized ratios are sometimes used in specific industries. For example, the so-called book-to-bill ratio is closely 10. 11. 12. watched for semiconductor manufacturers. A ratio of 0.93 indicates that for every $100 worth of chips shipped over some period, only $93 worth of new orders are received. In February 2018, the semiconductor equipment industry’s book-to-bill reached 1.01, compared to 0.98 during the month of January 2018. The book-to-bill ratio reached a low of 0.78 during October 2018. The three-month average of worldwide bookings in January 2018 was $1.30 billion, an increase of 6% over January 2017, while the three-month average of billings in February 2018 was $1.29 billion, a 2% increase from February 2017. What is this ratio intended to measure? Why do you think it is so closely watched? . (LOS5) So-called “same-store sales” are a very important measure for companies as diverse as Canadian Tire and Tim Hortons. As the name suggests, examining same-store sales means comparing revenues from the same stores or restaurants at two different points in time. Why might companies focus on same-store sales rather than total sales? (LO2) There are many ways of using standardized financial information beyond those discussed in this chapter. The usual goal is to put firms on an equal footing for comparison purposes. For example, for auto manufacturers, it is common to express sales, costs, and profits on a per-car basis. For each of the following industries, give an example of an actual company and discuss one or more potentially useful means of standardizing financial information: a. Public utilities b. Large retailers c. Airlines d. Online services e. Hospitals /- University textbook publishers (LOS5) In recent years, several manufacturing companies have reported the cash flow from the sale of Treasury securities in the cash from operations section of the statement of cash flows. What is the problem with this practice? Is there any situation in which this practice would be acceptable? (LO1) Suppose a company lengthens the time it takes to pay suppliers. How would this affect the statement of cash flows? How sustainable is the change in cash flows from this practice?
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help

Related Documents

Reflective Journal Assignment.docx
Evolution of the Xbox Supply Chain.pdf
5-1 report process for managing innovation.docx
Project 620 Executive Summary.docx
724 Winter 2024 Test 1 Final.docx
Term Project 1 - PMO - Group 2.docx
Criminal Justice Organizational Trends Paper.docx
Emergency management.docx
ORG602 Module 4 SLP Assignment.docx
BUS515 DB 4.docx
BUS515 DB 6.docx
BUS515 DB 5.docx
Recommended textbooks for you
Text book image
Foundations of Business (MindTap Course List)
Marketing
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Text book image
Foundations of Business - Standalone book (MindTa...
Marketing
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
SEE MORE TEXTBOOKS
Recommended textbooks for you
Text book image
Foundations of Business (MindTap Course List)
Marketing
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Text book image
Foundations of Business - Standalone book (MindTa...
Marketing
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
SEE MORE TEXTBOOKS