The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some new forecasting strategies for better operations management. You have collected the company’s relevant financial data, made reasonable assumptions based on the information available, and calculated the following ratios. Ratios Calculated Year 1 Year 2 Year 3 Price-to-cash-flow 2.80 1.96 1.57 Inventory turnover 5.60 4.48 3.58 Debt-to-equity 0.60 0.48 0.38 Based on the preceding information, your calculations, and your assumptions, which of the following statements can be included in your analysis report? Check all that apply. A plausible reason why Blue Hamster Manufacturing Inc.’s price-to-cash-flow ratio has decreased is that investors expect lower cash flow per share in the future. Blue Hamster Manufacturing Inc.’s ability to meet its debt obligations has improved since its debt-to-equity ratio decreased from 0.60 to 0.38. A decline in the debt-to-equity ratio implies a decline in the creditworthiness of the firm. A decline in the inventory turnover ratio can be explained by the new inventory management system that the company recently adopted, which led to more efficient inventory management.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter3: Analysis Of Financial Statements

Section: Chapter Questions

Problem 1bM

See similar textbooks

Related questions

Question

The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some new forecasting strategies for better operations management. You have collected the company’s relevant financial data, made reasonable assumptions based on the information available, and calculated the following ratios.

	Ratios Calculated
	Year 1	Year 2	Year 3
Price-to-cash-flow	2.80	1.96	1.57
Inventory turnover	5.60	4.48	3.58
Debt-to-equity	0.60	0.48	0.38

Based on the preceding information, your calculations, and your assumptions, which of the following statements can be included in your analysis report? Check all that apply.

A plausible reason why Blue Hamster Manufacturing Inc.’s price-to-cash-flow ratio has decreased is that investors expect lower cash flow per share in the future.

Blue Hamster Manufacturing Inc.’s ability to meet its debt obligations has improved since its debt-to-equity ratio decreased from 0.60 to 0.38.

A decline in the debt-to-equity ratio implies a decline in the creditworthiness of the firm.

A decline in the inventory turnover ratio can be explained by the new inventory management system that the company recently adopted, which led to more efficient inventory management.

AI-Generated Solution

AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.