You have been asked to invest in a private company. Before you invest, you calculate the Fixed Asset Turnover of the firm and find it to be very low. What does this measure tell you? A. This company does not generate a lot of sales for the amount of assets it has. B. This company needs a better sales and marketing effort to increase sales. C. This company is not a good investment. D. This company does not report its earnings accurately. Ratio analysis can be organized to provide a more effective approach to analyzing a company. How? A. Profit Margin, Tax Rate, and Current Ratio B. Current Ratio, Times-interest-earned, and Days' Sales in Cash C. Gross Margin, Inventory Turnover, and Fixed Asset Turnover D. Profit Margin, Asset Turnover, and Financial Leverage In financial forecasting, why is the percentage of sales method valid for predicting future income statement and balance sheet items? A. Because sales revenue is easy to estimate accurately and does not change very much over time. B. Because only companies that are growing sales will survive in the long-run. C. Because a large portion of the cost of doing business is related to increasing sales. D. Because many of the critical items on the income statement and balance sheet are directly related to the level of sales volume a company achieves. One important use of pro formas is to calculate external funding requirements in the future. Which of the following statements is true about external financing forecasting? A. External Funding Required = Total Market Value - (Current Liabilities + Equity) B. External financing forecasting can eliminate the possibility of running out of cash. C. Banks do not like to lend money to companies who need external financing. D. Owners do not like external financing because it reduces the amount of money they can earn on their shareholders equity. E. None of the above