06 Dec 14. Asset Turnover. In each case, choose the firm that you expect to have the higher asset turnover ratio.
14. Asset Turnover. In each case, choose the firm that you expect to have the higher asset turnover ratio. (Hint: think about the likely nature of each firm’s business model. For example, would the firm require a lot or a little capital? Would it strive for high sales or high profit margins?) (LO4-3
a. Economics Consulting Group or Home Depot
b. Catalog Shopping Network or Guccic.
c. Electric Utility Co. or Standard Supermarkets
16. A firm has a long-term debt–equity ratio of .4. Shareholders’ equity is $1 million. Current assets are $200,000, and the current ratio is 2. The only current liabilities are notes pay-able. What is the total debt ratio? (LO4-3)
19. Current Ratio. Would the following events increase or decrease a firm’s current ratio? (LO4-3)
a. Inventory is sold.
b. The firm takes out a bank loan to pay its suppliers
.c. The firm arranges a line of credit with a bank that allows it to borrow at any time to pay its suppliers.
d. A customer pays its overdue bills.
e. The firm uses cash to buy additional inventory
20. Financial Ratios. True or false? (LO4-3)
a. A company’s debt-equity ratio is always less than 1.
b. The quick ratio is always less than the current ratio.
c. For a profitable company, the return on equity is always less than the return on assets.
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