Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 5, Problem 5QE
To determine
Explain the relation between working capital turnover ratios and cash flow from operation.
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Select all of the following that will have a negative effect on the firm's cash
flows?
(Assume other variables remain constant, no change in revenues, etc.)
O Increase in Inventory
Decrease in Accounts Payable
Increase in Accounts Receivable
Increase in Working Capital
Decrease in Accounts Receivable
Decrease in Inventory
Increase in Accounts Payable
You are reviewing a company’s financial statements and find that it has had a negative cash flow from assets this year. What might explain this? Is this a good sign or a bad sign?
1. Help me selecting the right answer. Thank you
Chapter 5 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 5 - Prob. 1QECh. 5 - Prob. 2QECh. 5 - A firm has experienced an increasing current ratio...Ch. 5 - A firm has experienced a decrease in its current...Ch. 5 - Prob. 5QECh. 5 - A firm had the following values for the four debt...Ch. 5 - Prob. 7QECh. 5 - Prob. 8QECh. 5 - Prob. 9QECh. 5 - Prob. 10QE
Ch. 5 - Market equity beta measures the covariability of a...Ch. 5 - Altmans bankruptcy risk model utilizes the values...Ch. 5 - Calculating and Interpreting Risk Ratios. Refer to...Ch. 5 - Refer to the financial state-ment data for...Ch. 5 - Refer to the profitability ratios of Coca-Cola in...Ch. 5 - Delta Air Lines, Inc., is one of the largest...Ch. 5 - Prob. 17PCCh. 5 - Prob. 18PCCh. 5 - Prob. 19PCCh. 5 - Prob. 20PCCh. 5 - Prob. 21PCCh. 5 - Prob. 22PCCh. 5 - Compute the values of each of the ratios in...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Last year, National Co. reported negative net cash flow and negative free cash flow. However, its cash on the balance sheet increased. Which of the following could explain these changes in its cash position? a. The company had a sharp increase in its depreciation and amortization expenses. b. The company had a sharp increase in its inventories. c. The company issued new common stock. d. None of the choicesarrow_forwardMadison Makeup reported the following on its most recent financial statements (in $ millions). Fill in the highlighted cells. Miscellaneous financial information PP&E at end of this period Cash flows from investing activities other than CAPEX Cash flows from financing activities other than CFs from net debt, net stock, & dividend activity Cash flows from operating activities other than net income, depreciation, & amortization Debt issued Taxes Interest expense SG&A & other indirect expenses Cash flows from activities other than operating, investing, and financing Depreciation Debt repaid Revenue PP&E at end of last period Stock repurchased Amortization Cost of sales Dividends paid Stock issued Nonoperating income (expense) other than interest X 2021 67,356 372 157 6,648 2,754 1,548 1,574 1,693 -79 1,199 3,387 15,585 59,050 4,068 1,748 6,734 3,379 681 357 21,128arrow_forwardWhat is the cash conversion cycle (CCC)? Whyis it better, other things held constant, to have a shorter rather than a longer CCC? Suppose youknow a company’s annual sales, average inventories, average accounts receivable, average accountspayable, and annual cost of goods sold. How couldyou use that information to determine the company’s CCC? If you also knew its cost of capital, howcould you determine its annual cost of carryingworking capital? How could you determine howmuch the company would save if it could reducethe CCC by, say, 5 days? What are some actions itmight take to reduce the CCC?arrow_forward
- 36arrow_forwardIf a company’s current ratio declined in a year during whichits quick ratio improved, which of the following is the mostlikely explanation?a. Inventory is increasing.b. Inventory is declining.c. Receivables are being collected more rapidly than inthe past.d. Receivables are being collected more slowly than inthe past.arrow_forwardWhen a company reports negative net cash flows from operations _____. a.ratio of accounts payable to annual financing expenses helps in assessing the survival of the company b.ratio of cash to monthly cash expenses helps in assessing the survival of the company c.ratio of equity to monthly cash expenses helps in assessing the survival of the company d.ratio of equity to annual cash expenses helps in assessing the survival of the companyarrow_forward
- Over the past year, M.D. Ryngaert & Co. has realized an increase in its current ration and a drop in its total assets turnover ratio. However, the company’s sales, quick ration, and fixed assets turnover ratio have remained constant. What explains these changes?arrow_forwardAssume you are the controller of a large corporation, and the chief executive officer (CEO) has requested that you explain to them why the net income that you are reporting for the year is so low, when the CEO knows for a fact that the cash accounts are much higher at the end of the year than they were at the beginning of the year. Write a memo to the CEO to offer some possible explanations for the disparity between financial statement net income and the change in cash during the year.arrow_forwardYour consulting firm was recently hired to improve the performance of RP Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis. you want to determine the firm's cash conversion cycle. Using the following information and a 365-day year, what is the firm's present cash conversion cycle? Average inventory Annual sales Annual cost of goods seld Average accounts receivable Average accunts payable P5.000 P00.000 PH0,000 P0,000 F5000 140.6 days 120.6 days 133.6 days 148.0 days O 126.9 daysarrow_forward
- Develop brief answers to each of the following questions: 1. Why does a decrease in receivable turnover create the need for cash from operating activities? 2. Why would ratiosthat include one balance sheet account and one income statement account, such as receivable turnover or return on assets, be qu estionable if they came from quarterly or other interim financial reports?arrow_forwardWhat is the effect of changes in cash flows, investment cost and cash outflows on profitability (present value) index Profitability index will decrease with an increase in cash flows, a decrease in investment cost, or a decrease in cash outflows. Profitability index will decrease with an increase in cash outflows, an increase in investment cost, or an increase in cash inflows. Profitability index will increase with an increase in cash inflows, an increase in investment cost, or an increase in cash outflows. Profitability index will increase with an increase in cash flows, a decrease in investment costs or a decrease in cash outflows.arrow_forwardYour consulting firm was recently hired to improve the performance of ABC Inc, which is highly profitable but has been experiencing cash shortages due to its high growth rate. As one part of your analysis, you want to analyze the firm's cash cycle. Using the following information and a 365-day year, what is the firm’s operating cycle? Average inventory = $75,000 Annual sales = $875,000 Annual cost of goods sold = $525,000 Average accounts receivable = $160,000 Average accounts payable = $25,000arrow_forward
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