What does a firm need to do to improve liquidity? O A. Stock up on inventory in order to never run out of stock O B. Extend credit terms to customers in order to gain more sales O C. Pay all bills and payables when due D. Speed up collection of accounts receivable from customers
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- What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customersWhat does a firm need to do to improve liquidity? Extend credit terms to customers in order to gain more sales Stock up on inventory in order to never run out of stock Pay all bills and payables when due Speed up collection of accounts receivable from customersWhich one of the following statements is true if a company's collection period for accounts receivable is unacceptably long? a.The company may need to borrow to acquire operating cash. b.The company should expand operations with its excess cash. c.Cash flows from operations may be higher than expected for the company's sales. d.The company may offer trade discounts to lengthen the collection period.
- What does a low ratio in Creditors Turnover Ratio indicate? a. Company collects the money fast from Debtors b. It shows the speed at which the inventory will be converted into sales c. Company is delaying the payment to the creditors d. Company is making the payment to the creditors very promptlyWhat does a high ratio in Creditors Turnover Ratio indicate? a. Company is delaying the payment to the creditors b. Company is making the payment to the creditors very promptly c. It shows the speed at which the inventory will be converted into sales d. Company collects the money fast from DebtorsI. What are terms of credit? From the viewpoint of a short-tent creditor, why do lines of credit increase a company's liquidity? How arc the unused portions of these lines presented in financial statements? 2. Why are investments in marketable securities shown separately from cash equivalents in the balance sheet?
- Which of the following events will cause a company’s current ratio to decrease? a. The sale of inventory for credit (accounts receivable) b. Issuing stock for cash c. The sale of inventory for cash d. Paying off long-term debt with cashDescribe why an Investor would use Profitability Ratio’s? What are the following ratio's measuring (i) Return on Assets, (ii) Return on Equity, (iii) Profit Margin. Describe why a CEO would use Activity Ratio’s? What are the following ratio’s measuring (i) Days Receivables Outstanding, (ii) Inventory Turnover. Describe why a Bank would use Solvency Ratio’s? What are the following ratio’s measuring (i) Current Ratio, (ii) Acid-Test, (iii) Debt Ratio, (iv) Debt to Equity Ratio, Times Interest Earned ratioWhich of the following statements is most correct?(a) Working capital measures the company's ability to repay current liabilities using only current assets.(b) The day's sales outstanding (DSO) represents the average length of time that the firm must wait after making a sale before receiving cash.(c) The lower the debt ratio, the more the protection afforded creditors in the event of a liquidation.( d) All of the above.
- What are lines of credit? From the viewpoint of a short-term creditor, why do lines of credit increase a company’s liquid-ity? How are the unused portions of these lines presented in financial statements?If a company is worried about having enough cash to pay interest to their bondholders, rent to their landlords and wages to their employees. they are having:a. Solvency issuesb. Liquidity issuesc. Duration matching issuesIdentify if it will Increase, Decrease or No effect. 1.What will happen to the company’s liquidity when some of its products are sold from inventory? 2.What happens to the owner’s assets when the company purchases equipment with its cash? 3.What happens to the owner’s assets when the company repays the bank that had lent?