The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend.In terms of the ratios provided, what conclusion(s) can be drawn regarding the company's use of financial leverage during the 2023-2025 period?Using the ratios provided, what conclusion(s) can be drawn regarding the company's net investment in plant and equipment?O Word(s)O Word(s)O Word(s) Picasso Company is a wholesale distributor of packaging equipment and supplies. The company's sales have averaged about $900,000annually for the 3-year period 2023-2025. The firm's total assets at the end of 2025 amounted to $850,000.The president of Picasso Company has asked the controller to prepare a report that summarizes the financial aspects of the company'soperations for the past 3 years. This report will be presented to the board of directors at their next meeting.In addition to comparative financial statements, the controller has decided to present a number of relevant financial ratios which canassist in the identification and interpretation of trends. At the request of the controller, the accounting staff has calculated thefollowing ratios for the 3-year period 2023-2025.Current ratioAcid-test (quick) ratioAccounts receivable turnoverInventory turnoverDebts to assets ratioLong-term debt to assets ratioSales to fixed assets (fixed asset turnover)Sales as a percent of 2023 salesGross margin percentageNet income to salesReturn on assetsReturn on common stockholders' equity20231.801.048.754.9151.0 %31.0 %1.581.0036.0 %6.9 %7.7 %13.6 %20241.890.997.714.3246.0 %27.0 %1.691.0335.1 %7.0 %7.7 %13.1 %20251.960.876.423.4241.0 %24.0 %1.791.0734.6 %7.2 %7.8 %12.7 %In preparation of the report, the controller has decided first to examine the financial ratios independent of any other data todetermine if the ratios themselves reveal any significant trends over the 3-year period.

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Description: The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend.In terms of the ratios provided, what conclusion(s) can b

The current ratio represents a liquidity measure that determines the ability of the firm to pay off…

Business

Finance

The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend. In terms of the ratios provided, what conclusion(s) can be drawn regarding the company's use of financial leverage during the 2023-2025 period? Using the ratios provided, what conclusion(s) can be drawn regarding the company's net investment in plant and equipment? OWord(s) Oword(s)

The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend. In terms of the ratios provided, what conclusion(s) can be drawn regarding the company's use of financial leverage during the 2023-2025 period? Using the ratios provided, what conclusion(s) can be drawn regarding the company's net investment in plant and equipment? OWord(s) Oword(s)

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

Problem 1PS

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Which of the following statements about the capital acquisitions ratio is incorrect? Group of answer choices The ratio is computed by dividing cash flow from operating activities by cash paid for property, plant, and equipment. Because the need for investment in property, plant, and equipment differs dramatically across industries, a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry. A high ratio indicates more need for outside financing of current and future purchases of property, plant, and equipment. The ratio increases when an account receivable is collected.
Loreto Inc. has the following financial ratios: asset turnover = 1.60; net profit margin (i.e., net income/sales) = 6%; payout ratio = 30%; equity/assets = 0.50. a. What is Loreto's sustainable growth rate? b. What is its internal growth rate? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) A. Sustainable growth rate _______% B. Internal growth rate ______%
Ratios used to determine whether or not a company can survive over a long period of time are: Group of answer choices A)Liquidity ratios. b)Solvency ratios. c)Profitability ratios. d)Market indicators ratios. e)None of the above
The ratio, Days Sales Outstanding (DSO) measures how quickly a company pays its vendors and suppliers. Select one: True False A company is using the same financial ratios to measure their performance across multiple divisions which are in different industry. This approach provides the company with the most accurate trend analysis. Select one: True False Examples of financial leverage include all of the below except for (select the one that does not apply): a. Issuing stock b. Equipment Loan c. Working Capital Line of Credit d. Business Credit Card e. A private loan from family which must be repaid
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Which company is more reliant on equity to fund their assets based on the ratios you have? What are some of the consequences should it anticipate if it relies heavily on equity? Explain using supporting ratios and scenarios.
What is the comparison (analysis) of the Operating Margin of Industry Average Ratio and the Company A Ratio? The Operating Margin ratios has decreased and increased. Why? Industry Average Operating Margin 2015: 30.10% 2016: 37.75% 2017: 21.39% 2018: 18.92% 2019: 25.38% Company A Operating Margin 2015: 23.33% 2016: 15.69% 2017: 18.15% 2018: 25.06% 2019: 16.82%
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For fiscal year 2021, Costco Wholesale Corporation ( COST) had a net profit margin of 2.60%, asset turnover of 3.24, and a book equity multiplier of 3.28. a. Use this data to compute Costco's ROE using the DuPont Identity. b. If Costco's managers wanted to increase its ROE by 1.10 percentage points, how much higher would their new asset turnover need to be? c. If Costco's net profit margin fell by 1.10 percentage points, by how much would their asset turnover need to increase to maintain their ROE? a. Use this data to compute Costco's ROE using the DuPont Identity. Costco's ROE is %. (Round to two decimal places.) If Costco's net profit margin fell by 1.05 percentage points, by how much would their asset turnover need to increase to maintain their ROE?
Give typing answer with explanation and conclusion 27. EFN Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as EFN = −PM(S)b + [A − PM(S)b] × g Hint: Asset needs will equal A × g. The addition to retained earnings will equal PM(S)b × (1 + g).

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