Amazon recently replaced its Chief Financial Officer (CFO). Following the change in leadership Amazon also changed its Working Capital Policies from a Relaxed policy to a Moderate Policy. Holding all else equal, what effect is this change in working capital policy expected to have on Amazon's Return on Equity Ratio?

Amazon's Return on Equity Ratio will decrease.

Amazon's Return on Equity Ratio will stay the same.

Amazon's Return on Equity Ratio will increase.

Items on the Income Statement are scaled by _____________ when creating Common Size financial statements.

Net Income

Total Assets

Total Sales

Total Equity

You have been recently hired by an investment bank to consult with their clients on how to improve Cash Conversion Cycle statistics. A CFO for one of the client firms is concerned that their firm's Average Collection Period (DSO) is too high. Which of the following could you recommend for lowering Average Collection Period?

Increase the amount of inventory the company holds on its balance sheet.

Offer a discount for customers purchasing the firm's goods and services on credit instead of cash.

Increase the amount of time customers have to pay the firm back.

Increase the discount from 2% to 5% for customers paying off credit early.