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D USE THE INFORMATION BELOW TO ANSWER QUESTIONS 38, 39, 40 and 41 NoMoPed'lin, Inc. (an electric bicycle manufacturing company) just changed from a foreign
D USE THE INFORMATION BELOW TO ANSWER QUESTIONS 38, 39, 40 and 41 NoMoPed'lin, Inc. (an electric bicycle manufacturing company) just changed from a foreign based supplier to a domestic supplier. The NoMoPed'lin management group believes this change will decrease the company's inventory turnover ratio (i.e., COGS/Inventory) from its current level of 14.8 to 9.6. Management believes that there will be no effect on either sales or costs, and therefore no effect on net income. Any asset changes resulting from this new policy will be offset by a corresponding and equal change in short-term debt (i.e., notes payable). 38. If management is correct about the impact of the change in suppliers on the firm's inventory turnover ratio, all else constant, the firm's current ratio (assuming an initial current ratio of less than one) will: INCREASE NO CHANGE DECREASE 39. If management is correct about the impact of the change in suppliers on the firm's inventory turnover ratio, all else constant, the firm's return on assets (ROA) will: INCREASE DECREASE NO CHANGE 40. If management is correct about the impact of the change in suppliers on the firm's inventory turnover ratio, all else constant, the firm's debt ratio (assuming that the current debt ratio is 40%) will: INCREASE DECREASE NO CHANGE 41. If management is correct about the impact of the change in suppliers on the firm's inventory turnover ratio, all else constant, the firm's quick ratio (assuming an initial current quick ratio greater than one) will: INCREASE DECREASE NO CHANGE
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