As Beacon Company controller, you are responsible for informing the board of directors about its financial activities.
Question:
After the meeting, the company's CEO holds a press conference with analysts in which she mentions the following ratios.
Required
1. Why do you think the CEO decided to report 4 ratios instead of the 11 prepared?
2. Comment on the possible consequences of the CEO's reporting of the ratios selected.
2017 2016 2015 Sales trend percent Selling expenses to sales.. Sales to plant assets ratio Current ratio Acid-test ratio Inventory turnover Accounts receivable turnover Total asset turnover Return on total assets Return on stockholders' equity Profit margin ratio. 147.0% 135.0% 100.0% 10.1% 14.0% 15.6% 3.3 to 1 2.4 to 1 1.5 to 1 3.8 to 1 2.9 to 1 1.1 to 1 7.8 times 7.0 times 2.9 times 10.4% 10.7% 3.6% 3.6 to 1 2.7 to 1 .4 to 9.0 times 7.7 times 2.9 times 10.2 times 8.5 times 3.3 times 13.2% 11.0% 11.5% 14.1% 3.8% 4.0% 2017 147.0% 10.1% 3.8 to 1 2.9 to 1 2016 2015 Sales trend percent Selling expenses to sales. Sales to plant assets ratio Current ratio 135.0% 14.0% 3.6 to 1 2.7 to 1 100.0% 15.6% 3.3 to 1 2.4 to 1
Step by Step Answer:
1 The CEO appears to have selectively chosen from the 11 available ratios to present only the ones t...View the full answer
Fundamental Accounting Principles
ISBN: 978-1259536359
23rd edition
Authors: John Wild, Ken Shaw, Barbara Chiappett
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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