Read the table below for 3 firms: a bubble tea store, a bike store, a consulting firm. Company A B C Debt-Equity Ratio 0.2 0.3 0.5 Inventory Turnover 4 60 -- Current Ratio 1.8 0.9 1.28 Net Profit Margin 3.8% 6.4% 20% Receivables turnover 30.0 -- 6.0 (a) Distinguish each company and discuss the reason for your identification. (b) Judge whether the following statement is true and explain your answer: “If the managers focus on the current stock value, they will tend to overemphasize short-term profits at the expense of long-term profits.”
Read the table below for 3 firms: a bubble tea store, a bike store, a consulting firm. Company A B C Debt-Equity Ratio 0.2 0.3 0.5 Inventory Turnover 4 60 -- Current Ratio 1.8 0.9 1.28 Net Profit Margin 3.8% 6.4% 20% Receivables turnover 30.0 -- 6.0 (a) Distinguish each company and discuss the reason for your identification. (b) Judge whether the following statement is true and explain your answer: “If the managers focus on the current stock value, they will tend to overemphasize short-term profits at the expense of long-term profits.”
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Read the table below for 3 firms: a bubble tea store, a bike store, a consulting firm.
| Company | |||
| A | B | C | |
| Debt-Equity Ratio | 0.2 | 0.3 | 0.5 |
| Inventory Turnover | 4 | 60 | -- |
| 1.8 | 0.9 | 1.28 | |
| Net Profit Margin | 3.8% | 6.4% | 20% |
| Receivables turnover | 30.0 | -- | 6.0 |
(a) Distinguish each company and discuss the reason for your identification.
(b) Judge whether the following statement is true and explain your answer:
“If the managers focus on the current stock value, they will tend to overemphasize short-term profits at the expense of long-term profits.”
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education