Bb.19. Bluestone Metals, Inc., is a metal fabrication firm that manufactures prefabricated metal parts for customers in a varietyof industries. The firm's motto is "If you need it, we can make it." The CEO of Bluestone recently held a board meetingduring which he said that the company has the capability to build any of its products using a lean manufacturing modelthat allowed the company to keep inventory levels low. As an investor, you have calculated some ratios to analyzethe firm's performance. Bluestone's current ratios and quick ratios for the past 6 years are shown in the table below:Current ratioQuick ratio20141.21.220151.41.220161.41.320171.60.820181.90.620192.10.5What do you think of the CEO's claim that the firm's manufacturing process aloows it to keep inventories low? (Hint: Isthere 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 itsfinancial 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 easilyconverted into cash.D. Since inventory is included in the calculation of the current ratio, but not in the quick ratio, the ratios indicatethat inventory is increasing and Bluestone is not operating in a lean manufacturing mode.

Both the current ratio and quick ratio are important measures of liquidity. Current ratio is the…

(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.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash And Marketable Securities

Section: Chapter Questions

Problem 69RSCQ

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