Question :
71. The accounts receivable turnover ratio equals A. profit margin divided by average : 1245983
71. The accounts receivable turnover ratio equals
A. profit margin divided by average accounts receivable at the end of the period.
B. gross margin divided by average accounts receivable at the end of the period.
C. sales revenue divided by ending accounts receivable at the end of the period.
D. sales revenue divided by average accounts receivable during the period.
E. gross margin divided by average accounts receivable during the period.
72. Most firms that sell to other businesses, as opposed to consumers, sell on account and collect within 30 to 90 days. Interpreting any particular firm’s accounts receivable turnover and days receivable outstanding requires knowing the terms of sale. If a firm’s terms of sale are “net 30 days” and the firm collects its accounts receivable in 45 days, then the
A. collections are not in accord with the stated terms.
B. situation warrants a review of the credit and collection activity to ascertain the cause.
C. situation warrants a review of the credit and collection activity to guide corrective action.
D. situation indicates that the firm handles accounts receivable well.
E. choices a, b and c
73. The _____ ratio indicates how fast firms sell their inventory items, measured in terms of the rate of movement of goods into and out of the firm.
A. asset turnover
B. inventory turnover
C. asset
D. inventory
E. cost of goods sold
74. Managing inventory turnover involves balancing which of the following consideration(s) in setting the optimum level of inventory and, thus, the rate of inventory turnover?
A. For a given amount of gross margin on the goods, firms prefer to sell as many goods as possible with a minimum of assets tied up in inventories.
B. An increase in the rate of inventory turnover between periods indicates reduced costs of financing the investment in inventory.
C. Management does not want to have so little inventory on hand that shortages result in lost sales.
D. Increases in the rate of inventory turnover caused by inventory shortages could signal a loss of customers.
E. All of the above.
75. Some analysts calculate the inventory turnover ratio by dividing sales, rather than cost of goods sold, by the average inventory. Which of the following regarding the inventory turnover ratio is/are not true?
A. Using sales in the numerator, will lead to incorrect measures of the inventory turnover ratio for calculating the average number of days that inventory is on hand until sale.
B. As long as the ratio of selling price to cost of goods sold remains relatively constant, either measure will identify changes in the trend of the inventory turnover ratio.
C. Using sales in the numerator, will lead to correct measures of the inventory turnover ratio for calculating the average number of days that inventory is on hand until sale.
D. Choices a and b.
E. None of the above.
76. _____ measures the amount of sales generated from a particular level of investments in fixed assets.
A. Fixed asset ratio
B. Fixed asset turnover ratio
C. Asset ratio
D. Fixed asset ratio
E. Inventory turnover ratio
77. Which of the following could affect(s) the fixed asset turnover ratio?
A. Firms often invest in fixed assets several periods before these assets generate sales from products manufactured in their plants or sold in their stores.
B. A low or decreasing rate of fixed asset turnover may indicate expanding firms preparing for future growth.
C. Firms anticipating a decline in product sales could cut back expenditures on fixed assets and increase the fixed asset turnover ratio.
D. All of the above.
E. None of the above.
78. Analysts deciding between investments must consider the comparative risks. Which of the following factors affect the risk of business firms?
A. Economy-wide factors, such as increased inflation or interest rates, unemployment, and recessions.
B. Industry-wide factors, such as increased competition, lack of availability of raw materials, changes in technology, and increased government regulatory actions, such as anti-trust or clean environment policies.
C. Firm-specific factors, such as labor strikes, loss of facilities due to fire or other casualty, and poor health of key managerial personnel.
D. The amount of liquid resources available to the firm to run smoothly and effectively.
E. all of the above
79. Analysts deciding between investments must consider the comparative risks. Which of the following is/are economy-wide factors that affect the risk of business firms?
A. increased inflation
B. increased interest rates
C. unemployment
D. recessions
E. all of the above
80. Analysts deciding between investments must consider the comparative risks. Which of the following is/are not economy-wide factors that affect the risk of business firms?
A. increased inflation
B. increased interest rates
C. unemployment
D. recessions
E. increased competition
