29. Interpreting Financial Ratios. (LO3)

a. Turn back to Table 4-8. For the sample of industries in that table, plot operating profit margin again asset turnover in a scatter diagram. What is the apparent relationship between these two variables? Does this make sense to you?

b. Now plot a scatter diagram of the cash ratio versus quick ratio. Do these two measures of liquidity tend to move together? Would you conclude that once you know one of these ratios, there is little to be gained by calculating the other?