Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.1STP
Learning Goals 3, 4, 5
ST3-1 Ratio formulas and interpretations Without referring to the text, indicate for each of the following ratios the formula for calculating it and the kinds of problems, if any, the firm may have if that ratio is too high relative to the industry average. What if the ratio is too low relative to the industry average? Create a table similar to the one that follows and fill in the empty blocks.
Ratio | Too high | Too low |
Current ratio = | ||
Inventory turnover = | ||
Times interest earned = | ||
Gross profit margin = | ||
Price/ earnings (P/E) ratio = |
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Determine the sales or cost of good sold of a firm given the following information: Current ratio = 1.4; Acid-test Ratio = 1.2; Current Liabilities = P1,600.00; Inventory Turnover ratio = 8
a. P1,260.00b. P1,560.00c. P2,260.00d. P2,560.00e. P3,260.00
1. Inventory management aims at
a.
increase customer service levels
b.
All of the above
c.
Minimize stock holding cost
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forecast inventory
2. Which of the below is a reason for holding cost
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economies of scale
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Minimize stock holding cost
c.
To meet demand and supply
d.
All of the above
Identify which of the statements below are true (T) or false (F). Lean businesses aim to: Reduce inventory levels
Chapter 3 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 3.1 - Prob. 3.1RQCh. 3.1 - Describe the purpose of each of the four major...Ch. 3.1 - Prob. 3.3RQCh. 3.1 - Prob. 3.4RQCh. 3.2 - With regard to financial ratio analysis, how do...Ch. 3.2 - What is the difference between cross-sectional and...Ch. 3.2 - Prob. 3.7RQCh. 3.2 - Prob. 3.8RQCh. 3.3 - Under what circumstances would the current ratio...Ch. 3.3 - In Table 3.5, most of the specific firms listed...
Ch. 3.4 - To assess the firms average collection period and...Ch. 3.5 - What is financial leverage?Ch. 3.5 - What ratio measures the firms degree of...Ch. 3.6 - What three ratios of profitability appear on a...Ch. 3.6 - Prob. 3.15RQCh. 3.6 - Prob. 3.16RQCh. 3.7 - What do the price/earnings (P/E) ratio and the...Ch. 3.8 - Financial ratio analysis is often divided into...Ch. 3.8 - Prob. 3.19RQCh. 3.8 - What three areas of analysis are combined in the...Ch. 3 - For the quarter ended January 28, 2017, Kroger...Ch. 3 - Learning Goals 3, 4, 5 ST3-1 Ratio formulas and...Ch. 3 - Prob. 3.2STPCh. 3 - Prob. 3.1WUECh. 3 - Learning Goal 1 E3-2 Explain why the income...Ch. 3 - Prob. 3.3WUECh. 3 - Learning Goal 3 E3-4 Bluestone Metals Inc. is a...Ch. 3 - Learning Goal 6 E3-5 If we know that a firm has a...Ch. 3 - Financial statement account identification Mark...Ch. 3 - Learning Goal 1 P3-2 1ncome statement preparation...Ch. 3 - Prob. 3.3PCh. 3 - Learning Goal 1 P3-4 Calculation of EPS and...Ch. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Learning Goals 1 P3-7 Initial sale price of common...Ch. 3 - Prob. 3.8PCh. 3 - Learning Goal 1 P3-9 Changes In stockholders...Ch. 3 - Learning Goals 2, 3, 4, 5 P3-10 Ratio comparisons...Ch. 3 - Learning Goal 3 P3-11 Liquidity management Bauman...Ch. 3 - Prob. 3.12PCh. 3 - Inventory management Three companies that compete...Ch. 3 - Accounts receivable management The table below...Ch. 3 - Prob. 3.15PCh. 3 - Learning Goal 4 P3-16 Debt analysis Springfield...Ch. 3 - Prob. 3.17PCh. 3 - Learning Goals 2, 3, 4 P3-18 Using Tables 3.1,...Ch. 3 - Learning Goals 5 P3-19 Common-size statement...Ch. 3 - The relationship between financial leverage and...Ch. 3 - Learning Goal 4 P3-21 Analysis of debt ratios...Ch. 3 - Learning Goal 6 P3-22 Ratio proficiency McDougal...Ch. 3 - Learning Goal 6 P3-23 Cross-sectional ratio...Ch. 3 - Learning Goal 6 P3-24 Financial statement analysis...Ch. 3 - Learning Goals 6 P3- 25 Integrative: Complete...Ch. 3 - Learning Goal 6 P3-26 DuPont system of analysis...Ch. 3 - Learning Goal 6 P3-27 Complete ratio analysis,...Ch. 3 - Spreadsheet Exercise The income statement and...
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- Answer with examplearrow_forwardView Policies Current Attempt in Progress Very high turnovers O are always the goal of management. O may create stockouts O are a measurement of profitability. O are unaffected by inventory writedowns.arrow_forwardWhich of the following statements is true with regard to the gross profit ratio? An increase in cost of goods sold would increase the gross profit ratio (assuming sales remain constant). An increase in the gross profit ratio may indicate that a company is efficiently managing its inventory. An increase in selling expenses would lower the gross profit ratio. a.1 b.2 c.1 and 2 d.2 and 3arrow_forward
- MULTIPLE CHOICE. Answer the following: 1.It show how efficient the business is as to its purchase or use of inventory for the whole operation. a. Operating Income b. Inventory Liquidation Ratio c. Inventory Turnover d. Operating Efficiency 2. This shows that the original investment made by the owner will be recovered. a. Payback Period b. Return on Investment c. Asset Test Ratio d. Capital Turnover Ratio 3. If the company wants to see the ratio of income generation of the business, what formula will they use for its computation? a. Total Projected Cost / Average Annual Cash Inflow b. (Net Income/Cost of Investment) x 100 c. (Net Profit/Net Sales) X 100 d. Cost of Goods Sold/ Average Inventory 4. If the cost of goods sold year 2023 is P60,000, net sales is P60,000 and average inventory is 20,000, what is the inventory turn-over? a. 6 times b. 3 times c.2 times d. 2.5 timesarrow_forwardOperating leverage measures the: 1. Change in profit when sales changes 2. change in contrribution when sales changes 3. change in BEP when fixed cost changes 4. change in BEP when sales changesarrow_forwardHases as the first ut (LIFO) 4. Conservatism 5. Consistency Principle 5. Weighted-Average 7. Disclosure Principle b. Requires that a company report enough information for outsiders to make knowledgeable decisions. c. Identifies exactly which inventory item was sold Usually used for higher cost inventory. d. Calculates a weighted average cost based on the cost of goods available for sale and the number of units available. 3. First-In, First-Out (FIFO) e. Principle whose foundation is to exercise caution in reporting financial statement items. f. Treats the most recent/newest purchases as the first units sold. g. Businesses should use the same accounting methods from period to period. h. Principle that states significant items must conform to GAAP. Learning Objective 2 6-17 Comparing inventory methods Express Lane, a regional convenience store chain, maintains milk inventory by the gal- lon. The first month's milk purchases and sales at its Freeport, Florida, location follow: 1. Ending…arrow_forward
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