As Beacon Company controller, you are responsible for informing the board of directors about its financial activities.
Question:
After the meeting, the companys 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 CEOs reporting of the ratiosselected.
2009 2008 2007 Sales trend percent 135.0% 14.0% 100.0% 15.6% 147.076 3.6 to I 2.7 to I 1.4 to I 3.3 to I 2.4 to l 1.5 to I Sales to plant assets ratio ..^.P...-3.8 to I Current ratio.. Acld-test ratlo 9.-... Inventory turnover .. -7.8 times 9.0 times0.2 tmes Accounts recelvable turnover 7.0 tlmes 7.7 times 8.5 times Total asset turnover . ..-._......... 2.9 times 2.9 tmes 3.3 times 2.9 to l 1.I to I Return on stockholders' equity Proflt margin ratlo. 10.7% 3.6% 1 1.0% ! 1.5% 3.8% 13.2% 14.1% 4,0% 2009 2008 2007 Sales trend percent.. 147.0% 135.0% 100.0% Selling expenses to sales 10.1% 14.0% 15.6% Sales to plant assets rato3.8 to 3.6 to 3.3 to I 2.9 to 2.7 to 2.4 to I Current ratio
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
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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