Suppose you are conducting an analysis of the financial performance Manufacturing Inc. over the past three years. The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some new forecasting strategies for better operations management. You have collected the company's relevant financial data, made reasonable assumptions based on the information available, and calculated the following ratios. Price-to-cash-flow Inventory turnover Debt-to-equity Ratios Calculated Year 1 Year 2 Year 3 2.80 1.96 1.57 5.60 48 3.58 0.60 0.48 0.38 Based on the preceding information, your calculations, and your assumptions, which of the following statements can be included in your analysis report? Check all that apply. A plausible reason why Blue Hamster Manufacturing Inc.'s price-to-cash-flow ratio has decreased is that investors expect lower cash flow per share in the future. A decline in the inventory turnover ratio can be explained by the new inventory management system that the company recently adopted, which led to more efficient inventory management. Blue Hamster Manufacturing Inc.'s ability to meet its debt obligations has improved since its debt-to-equity ratio decreased from 0.60 to 0.38. A decline in the inventory turnover ratio could likely be explained by operational difficulties that the company faced, which led to duplicate orders placed to vendors.
Suppose you are conducting an analysis of the financial performance Manufacturing Inc. over the past three years. The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some new forecasting strategies for better operations management. You have collected the company's relevant financial data, made reasonable assumptions based on the information available, and calculated the following ratios. Price-to-cash-flow Inventory turnover Debt-to-equity Ratios Calculated Year 1 Year 2 Year 3 2.80 1.96 1.57 5.60 48 3.58 0.60 0.48 0.38 Based on the preceding information, your calculations, and your assumptions, which of the following statements can be included in your analysis report? Check all that apply. A plausible reason why Blue Hamster Manufacturing Inc.'s price-to-cash-flow ratio has decreased is that investors expect lower cash flow per share in the future. A decline in the inventory turnover ratio can be explained by the new inventory management system that the company recently adopted, which led to more efficient inventory management. Blue Hamster Manufacturing Inc.'s ability to meet its debt obligations has improved since its debt-to-equity ratio decreased from 0.60 to 0.38. A decline in the inventory turnover ratio could likely be explained by operational difficulties that the company faced, which led to duplicate orders placed to vendors.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:Suppose you are conducting an analysis of the financial performance of Blue Hamster
Manufacturing Inc. over the past three years.
The company did not issue new shares during these three years and has faced some operational
difficulties. The company has thus pilot tested some new forecasting strategies for better
operations management. You have collected the company's relevant financial data, made
reasonable assumptions based on the information available, and calculated the following ratios.
Price-to-cash-flow
Inventory turnover
Debt-to-equity
Ratios Calculated
Year 1 Year 2 Year 3
2.80 1.96 1.57
5.60 4.48 3.58
0.60 0.48 0.38
Based on the preceding information, your calculations, and your assumptions, which of the
following statements can be included in your analysis report? Check all that apply.
A plausible reason why Blue Hamster Manufacturing Inc.'s price-to-cash-flow ratio has
decreased is that investors expect lower cash flow per share in the future.
A decline in the inventory turnover ratio can be explained by the new inventory
management system that the company recently adopted, which led to more efficient
inventory management.
Blue Hamster Manufacturing Inc.'s ability to meet its debt obligations has improved since
its debt-to-equity ratio decreased from 0.60 to 0.38.
A decline in the inventory turnover ratio could likely be explained by operational
difficulties that the company faced, which led to duplicate orders placed to vendors.
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