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The table below shows the ratios for three companies: airline, discount clothing store, accounting firm. COMPANY 1 2 3 Debt-equity 0.2 1.2 0.7 Inventory Turnover 12.0 0.3 Current Ratio 2.5 1.5 1.3 Sales/Total Assets 4.0 1.7 7.0 Sales/Receivables 40.0 12.3 7.2 Interpret the ratios in the table to identify the three (3) firms and briefly discuss your reasons using the following format: Company (Number) is the Reason: Briefly discuss two (2) reasons why it is difficult to use ratios to compare firms from different countries. Briefly discuss the basis for Mogdiliani and Miller (MM) to claim in their Proposition 1 that capital structure does not matter.

The table below shows the ratios for three companies: airline, discount clothing store, accounting firm. COMPANY 1 2 3 Debt-equity 0.2 1.2 0.7 Inventory Turnover 12.0 0.3 Current Ratio 2.5 1.5 1.3 Sales/Total Assets 4.0 1.7 7.0 Sales/Receivables 40.0 12.3 7.2 Interpret the ratios in the table to identify the three (3) firms and briefly discuss your reasons using the following format: Company (Number) is the Reason: Briefly discuss two (2) reasons why it is difficult to use ratios to compare firms from different countries. Briefly discuss the basis for Mogdiliani and Miller (MM) to claim in their Proposition 1 that capital structure does not matter.

Century 21 Accounting Multicolumn Journal
Century 21 Accounting Multicolumn Journal
11th Edition
ISBN:9781337679503
Author:Gilbertson
Publisher:Gilbertson
Chapter17: Financial Statement Analysis
Section: Chapter Questions
Problem 3AP
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The table below shows the ratios for three companies: airline, discount clothing store, accounting firm. COMPANY 1 2 3 Debt-equity 0.2 1.2 0.7 Inventory Turnover 12.0 0.3 Current Ratio 2.5 1.5 1.3 Sales/Total Assets 4.0 1.7 7.0 Sales/Receivables 40.0 12.3 7.2 Interpret the ratios in the table to identify the three (3) firms and briefly discuss your reasons using the following format: Company (Number) is the Reason: Briefly discuss two (2) reasons why it is difficult to use ratios to compare firms from different countries. Briefly discuss the basis for Mogdiliani and Miller (MM) to claim in their Proposition 1 that capital structure does not matter.
Transcribed Image Text:The table below shows the ratios for three companies: airline, discount clothing store, accounting firm. COMPANY 1 2 3 Debt-equity 0.2 1.2 0.7 Inventory Turnover 12.0 0.3 Current Ratio 2.5 1.5 1.3 Sales/Total Assets 4.0 1.7 7.0 Sales/Receivables 40.0 12.3 7.2 Interpret the ratios in the table to identify the three (3) firms and briefly discuss your reasons using the following format: Company (Number) is the Reason: Briefly discuss two (2) reasons why it is difficult to use ratios to compare firms from different countries. Briefly discuss the basis for Mogdiliani and Miller (MM) to claim in their Proposition 1 that capital structure does not matter.
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