Which of the following statements is true?
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Which of the following statements is true?
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- A high inventory turnover ratio provides evidence that a company is having problems with stockouts and disgruntled customers. Do you agree? Explain.Trade-Offs among Acceptable Accounting Alternatives. Firms value inventory under a variety of assumptions, including two common methods: last-in first-out (LIFO) and first-in first-out (FIFO). Ignore taxes, assume that prices increase over time, and assume that a firms inventory balance is stable or grows over time. Which inventory method provides a balance sheet that better reflects the underlying economics, and why? Which method provides an income statement that better reflects the underlying economics, and why?Explain how LIFO, FIFO, and Weighted average inventory systems will have different affects on a firm’s income statement and balance sheet. If a firm was concerned about reducing their tax burden, which inventory system would best benefit them? Assume costs have been steadily rising over time.
- Which of the following statements is most correct? Select one: A. A company with a current ratio of 0.5, should purchase additional inventory on credit if it wants to improve this ratio. B. Return on assets is a function of two variables, the profit margin and current asset turnover. C. A company with a current ratio of 0. 5, should sell some of the existing inventory at cost if it wants to improve this ratio. D. Firms with low rates of return on stockholders’ equity tend to sell at relatively high ratios of market price to book value.Explain the purpose of the inventory turnover ratio? Is it possible for a firm to have a high current ratio and still have difficulty paying its current bills? Why or why not?answer these question in just two sentences. a..“If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would increase.” If it is possible give reason in two sentences. b. In general, it's better to have a low inventory turnover ratio than a high one, as a low ratio indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. If it is false give reason in two sentences. c. “It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only if all the firms being compared have the same proportion of fixed assets to total assets.” If you are not agreed with this statement give justification in two sentences.
- In general, it's better to have a low inventory turnover ratio than a high one, as a low ratio indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. If it is false give reason in two sentences.Which of the following statements is most correct?(a) A decline in the inventory turnover ratio suggests that the firm's liquidity position is improving.{b) The profit margin on sales is calculated by dividing net operating income by sales(c) When a corporation buys back its own stock, this is called Treasury Stock. The firm's cash and equity are both reduced.(d) None of the above.Explain whether the following situations, taken independently, would be favorable or unfavorable: ( a ) increase ingross profit percentage, ( b ) decrease in inventory turnoverratio, ( c ) increase in earnings per share, ( d ) decrease indays to collect, and ( e ) increase in net profit margin.
- If one firm is growing rapidly and another is not, how might this distort a comparisonof their inventory turnover ratios?A firm's market-to-book ratio might be greater than 1.0 due to accounting reasons. An example of an accounting reason that would cause the market-to-book ratio to increase is a. straight-line methods of depreciation. b. using LIFO versus FIFO for inventory. c. level 1 fair values. d. off-balance-sheet assets arising from investments in successful research and development programs that are expensed according to conservative accounting principles.Which of the following statements is usually correct? A low receivables turnover is good for the business The lower the total debt-to-equity ratio, the lower the financial risk for a firm The higher the tax rate for a firm, the lower the interest coverage ratio An increase in net profit margin with no change in sales or assets means a poor ROI
