1. Is it becoming easier for the company to pay its bills as they come due? 2. Are customers paying their accounts at least as fast now as they were in Year 1? 3. Are the accounts receivable increasing, decreasing, or remaining constant? 4. Is inventory increasing, decreasing, or remaining constant? 5. Is the market price of the company's stock going up or down? 6. Is the earnings per share increasing or decreasing? 7. Is the price-earning ratio going up or down?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Problem 16-17 (Static) Interpretation of Financial Ratios [LO16-2, LO16-3, LO16-6]
Pecunious Products, Incorporated's financial results for the past three years are summarized below:
Sales trend
Current ratio
Acid-test ratio
Accounts receivable turnover
Inventory turnover
Dividend yield
Dividend payout ratio
Dividends paid per share*
Year 3
128.0
2.5
9.4
6.5
7.1%
40%
$1.50
Year 2
115.0
2.3
0.9
10.6
7.2
6.5%
50%
$ 1.50
Year 1
100.0
2.2
1.1
12.5
8.0
5.8%
60%
$ 1.50
*There have been no changes in common stock outstanding over the three-year period.
Required:
Review the results above and answer the following questions:
1. Is it becoming easier for the company to pay its bills as they come due?
2. Are customers paying their accounts at least as fast now as they were in Year 1?
3. Are the accounts receivable increasing, decreasing, or remaining constant?
4. Is inventory increasing, decreasing, or remaining constant?
5. Is the market price of the company's stock going up or down?
6. Is the earnings per share increasing or decreasing?
7. Is the price-earning ratio going up or down?
1. Is it becoming easier for the company to pay its bills as they come due?
2. Are customers paying their accounts at least as fast now as they were in Year 1?
5. Is the market price of the company's stock going up or down?
6. Is the earnings per share increasing or decreasing?
7. Is the price-earning ratio going up or down?
3. Are the accounts receivable increasing, decreasing, or remaining constant?
4. Is inventory increasing, decreasing, or remaining constant?
Yes
Transcribed Image Text:Problem 16-17 (Static) Interpretation of Financial Ratios [LO16-2, LO16-3, LO16-6] Pecunious Products, Incorporated's financial results for the past three years are summarized below: Sales trend Current ratio Acid-test ratio Accounts receivable turnover Inventory turnover Dividend yield Dividend payout ratio Dividends paid per share* Year 3 128.0 2.5 9.4 6.5 7.1% 40% $1.50 Year 2 115.0 2.3 0.9 10.6 7.2 6.5% 50% $ 1.50 Year 1 100.0 2.2 1.1 12.5 8.0 5.8% 60% $ 1.50 *There have been no changes in common stock outstanding over the three-year period. Required: Review the results above and answer the following questions: 1. Is it becoming easier for the company to pay its bills as they come due? 2. Are customers paying their accounts at least as fast now as they were in Year 1? 3. Are the accounts receivable increasing, decreasing, or remaining constant? 4. Is inventory increasing, decreasing, or remaining constant? 5. Is the market price of the company's stock going up or down? 6. Is the earnings per share increasing or decreasing? 7. Is the price-earning ratio going up or down? 1. Is it becoming easier for the company to pay its bills as they come due? 2. Are customers paying their accounts at least as fast now as they were in Year 1? 5. Is the market price of the company's stock going up or down? 6. Is the earnings per share increasing or decreasing? 7. Is the price-earning ratio going up or down? 3. Are the accounts receivable increasing, decreasing, or remaining constant? 4. Is inventory increasing, decreasing, or remaining constant? Yes
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