A company has a quick ratio of 2.3 and a current ratio of 2.8. Industry averages are 2.0 for the quick ratio and 3.1 for the current ratio. Which of the following statements is most likely true? Question options: The company has less inventory than the industry benchmark. The company has more receivables than the industry benchmark. The company has less receivables than the industry benchmark. The company has more inventory than the industry benchmark.

A company has a quick ratio of 2.3 and a current ratio of 2.8. Industry averages are 2.0 for the quick ratio and 3.1 for the current ratio. Which of the following statements is most likely true? Question options: The company has less inventory than the industry benchmark. The company has more receivables than the industry benchmark. The company has less receivables than the industry benchmark. The company has more inventory than the industry benchmark.

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

Problem 15BEA: Last year, Nikkola Company had net sales of 2,299,500,000 and cost of goods sold of 1,755,000,000....

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The Jimenez Corporation’s forecasted 2011 financial statements follow, along withsome industry average ratios.a. Calculate Jimenez’s 2011 forecasted ratios, compare them with the industry averagedata, and comment briefly on Jimenez’s projected strengths and weaknesses.b. What do you think would happen to Jimenez’s ratios if the company initiatedcost-cutting measures that allowed it to hold lower levels of inventory andsubstantially decreased the cost of goods sold? No calculations are necessary:Think about which ratios would be affected by changes in these twoaccounts. Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2011AssetsCash $ 72,000Accounts receivable 439,000Inventories 894,000Total current assets $1,405,000Fixed assets 431,000Total assets $1,836,000Liabilities and EquityAccounts and notes payable $ 432,000Accruals 170,000Total current liabilities $ 602,000Long-term debt 404,290Common stock 575,000Retained earnings 254,710Total liabilities and equity…
If 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.
Compare the performance of Fly X to the Industry. For each ratio, comment on whether Fly X is positive or negative relative to the Industry. Median Industry Fly X Ratios Current Ratio 1.43X 1.45 Quick Ratio 0.84X 0.88 Total Asset Turnover Ratio 0.85 1.30 Inventory Turnover Ratio 6.15 12.10 Average Inventory Ratio 59.35 30.17 Receivables Turnover 9.82 13.08 Average Collection Period 37.17 27.90 Debt Ratio 0.52 0.39
Compared to using the weighted average cost method to account for inventory, during aperiod in which prices are generally rising, the current ratio of a company using the FIFOmethod would most likely be:A. lower.B. higher.C. dependent upon the interaction with accounts payable.
A firm’s balance sheets for the last two years are as follows (refer to image): Sales in 20X1 were $250,000. Sales in 20X2 were $250,000. a. Based solely on the current ratio and the quick ratio, has the firm’s liquidity position deteriorated or improved? b. Without doing a calculation, has days sales outstanding (receivables turnover) improved? How do you know? c. Without doing a calculation, has inventory turnover deteriorated? How do you know? d. If the firm earned $5,000 during 2012, what proportion of those earningswere distributed?
Which of the following is false? Select one: a. Days’ sales in inventory is equal to the average number of days it takes to sell inventory. b. Higher days’ sales in inventory means that inventory is less likely to become obsolete because it is sold in fewer days c. Inventory ratio is equal to the number of times inventory was completely purchased and sold (turned over) during the period. d. Inventory turnover ratio is calculated by dividing COGS by the average value of inventory over the period.
Which of the following ratios would a company want to see decrease over time? ROA Days Sales in Recievables Inventory turnover ROE Current Ratio
Bulldogs Inc. has recently calculated the inventory turnover for the currently year to be 30. In prior years, the same ratio was always lower. Which of the following statements would be the best interpretation for the reason for the ratio’s change? a. The company purchased less inventory in the current year than in prior years. b. The company had less sales in the current year than in prior years. c. The company took more days to sell its inventory in the current year than in prior years. d. The company took fewer days to sell its inventory in the current year than in prior years.
Suppose you manage a company, which presents the following financial indicators: Current Ratio: 2 Average Collection Period: 76.3 days Inventory Turnover: 6.7 Operating Income Return on Investment: 13.2% Debt Ratio: 32% The competition has the following results: Current Ratio: 2 Average Collection Period: 35 days Inventory Turnover: 6.7 Operating Income Return on Investment:10% Debt Ratio: 60% How is the financial situation of your company? Justify your answer.
During times of deflation , LIFO will provide the highest closing inventory figure and the highest profit figure, compared to FIFO and AVCO in a given accounting period . IS it true or false
Which of the following is false? Select one: a. Day's sales in inventory is equal to the average number of days it takes to sell inventory b. Higher Day's sales in inventory means that inventory is less likely to become obsolete because it is sold in fewer days c. Inventory ratio is equal to the number of times inventory was completely purchased and sold (turn over) during the period d. Inventory turnover ratio is calculated by dividing COGS by the average value of inventory over the period
Kiley Corporation had the following data for the most recent year (in millions). The new CFO believes (1) that an improved inventory management system could lower the average inventory by $4,000, (2) that improvements in the credit department could reduce receivables by $2,000, and (3) that the purchasing department could negotiate better credit terms and thereby increase accounts payable by $2,000. Furthermore, she thinks that these changes would not affect either sales or the costs of goods sold. If these changes were made, by how many days would the cash conversion cycle be lowered? (Hint: Calculate the CCC for original and then for revised and take the difference. SHOW ALL WORK)

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	The company has less inventory than the industry benchmark.
	The company has more receivables than the industry benchmark.
	The company has less receivables than the industry benchmark.
	The company has more inventory than the industry benchmark.