Suppose you are conducting an analysis of the financial performance of Cold Goose Metal Works 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. Ratios Calculated Year 1 Year 2 1.00 1.30 2.40 Inventory turnover 2.00 Debt-to-equity Price-to-cash-flow Year 3 1.46 2.69 0.30 0.32 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. Cold Goose Metal Works Inc.'s ability to meet its debt obligations has worsened since its debt-to-equity ratio Increased from 0.30 to 0.38. The company's creditworthiness has improved over these three years as evidenced by the increase in its debt-to-equity ratio over time. An improvement in the inventory turnover ratio could likely be explained by the new sales-forecasting strategies that led to better Inventory management. A plausible reason why Cold Goose Metal Works Inc.'s price-to-cash-flow ratio has increased is that investors expect higher cash flow per share in the future.
Suppose you are conducting an analysis of the financial performance of Cold Goose Metal Works 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. Ratios Calculated Year 1 Year 2 1.00 1.30 2.40 Inventory turnover 2.00 Debt-to-equity Price-to-cash-flow Year 3 1.46 2.69 0.30 0.32 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. Cold Goose Metal Works Inc.'s ability to meet its debt obligations has worsened since its debt-to-equity ratio Increased from 0.30 to 0.38. The company's creditworthiness has improved over these three years as evidenced by the increase in its debt-to-equity ratio over time. An improvement in the inventory turnover ratio could likely be explained by the new sales-forecasting strategies that led to better Inventory management. A plausible reason why Cold Goose Metal Works Inc.'s price-to-cash-flow ratio has increased is that investors expect higher cash flow per share in the future.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
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Transcribed Image Text:Suppose you are conducting an analysis of the financial performance of Cold Goose Metal Works 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.
Ratios Calculated
Year 1 Year 2
1.00
1.30
2.40
Inventory turnover 2.00
Debt-to-equity
Price-to-cash-flow
Year 3
1.46
2.69
0.30 0.32 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.
Cold Goose Metal Works Inc.'s ability to meet its debt obligations has worsened since its debt-to-equity ratio Increased from 0.30 to 0.38.
The company's creditworthiness has improved over these three years as evidenced by the increase in its debt-to-equity ratio over time.
An improvement in the inventory turnover ratio could likely be explained by the new sales-forecasting strategies that led to better
Inventory management.
A plausible reason why Cold Goose Metal Works Inc.'s price-to-cash-flow ratio has increased is that investors expect higher cash flow per
share in the future.
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