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(Select all the answers that apply.) A. As with any analysis using ratios, you should investigate other financial ratios for Bluestone to further assess its financial health. B. The current ratio is increasing but the quick ratio is declining. C. The current ratio provides a better measure of overall liquidity only when a firm's inventory cannot be easily converted into cash. D. Since inventory is included in the calculation of the current ratio, but not in the quick ratio, the ratios indicate that inventory is increasing and Bluestone is not operating in a lean manufacturing mode.

(Select all the answers that apply.) A. As with any analysis using ratios, you should investigate other financial ratios for Bluestone to further assess its financial health. B. The current ratio is increasing but the quick ratio is declining. C. The current ratio provides a better measure of overall liquidity only when a firm's inventory cannot be easily converted into cash. D. Since inventory is included in the calculation of the current ratio, but not in the quick ratio, the ratios indicate that inventory is increasing and Bluestone is not operating in a lean manufacturing mode.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bluestone Metals, Inc., is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm's motto is "If you need it, we can make it." The CEO of Bluestone recently held a board meeting during which he said that the company has the capability to build any of its products using a lean manufacturing model that allowed the company to keep inventory levels low. As an investor, you have calculated some ratios to analyze the firm's performance. Bluestone's current ratios and quick ratios for the past 6 years are shown in the table below: Current ratio Quick ratio 2014 1.2 1.2 2015 1.4 1.2 2016 1.4 1.3 2017 1.6 0.8 2018 1.9 0.6 2019 2.1 0.5 What do you think of the CEO's claim that the firm's manufacturing process aloows it to keep inventories low? (Hint: Is there a possible warning sign in the relationship between the two ratios?) (Select all the answers that apply.) A. As with any analysis using ratios, you should investigate other financial ratios for Bluestone to further assess its financial health. B. The current ratio is increasing but the quick ratio is declining. C. The current ratio provides a better measure of overall liquidity only when a firm's inventory cannot be easily converted into cash. D. Since inventory is included in the calculation of the current ratio, but not in the quick ratio, the ratios indicate that inventory is increasing and Bluestone is not operating in a lean manufacturing mode.
Transcribed Image Text:Bluestone Metals, Inc., is a metal fabrication firm that manufactures prefabricated metal parts for customers in a variety of industries. The firm's motto is "If you need it, we can make it." The CEO of Bluestone recently held a board meeting during which he said that the company has the capability to build any of its products using a lean manufacturing model that allowed the company to keep inventory levels low. As an investor, you have calculated some ratios to analyze the firm's performance. Bluestone's current ratios and quick ratios for the past 6 years are shown in the table below: Current ratio Quick ratio 2014 1.2 1.2 2015 1.4 1.2 2016 1.4 1.3 2017 1.6 0.8 2018 1.9 0.6 2019 2.1 0.5 What do you think of the CEO's claim that the firm's manufacturing process aloows it to keep inventories low? (Hint: Is there a possible warning sign in the relationship between the two ratios?) (Select all the answers that apply.) A. As with any analysis using ratios, you should investigate other financial ratios for Bluestone to further assess its financial health. B. The current ratio is increasing but the quick ratio is declining. C. The current ratio provides a better measure of overall liquidity only when a firm's inventory cannot be easily converted into cash. D. Since inventory is included in the calculation of the current ratio, but not in the quick ratio, the ratios indicate that inventory is increasing and Bluestone is not operating in a lean manufacturing mode.
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