BTN 13-7 Assume that David and Tom Gardner of The Motley Fool (Fool.come) have i
ID: 2546689 • Letter: B
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BTN 13-7 Assume that David and Tom Gardner of The Motley Fool (Fool.come) have impressed you since you first heard of their rather improbable rise to prominence in financial circles. You learn of a staff opening at The Motley Fool and decide to apply for it. Your resume is successfully screened from the thousands received and you advance to the interview process. You learn that the interview consists of analyzing the following financial facts and answering analysis questions below. (The data are taken from a small merchandiser in outdoor recreational equipment.) 2015 2013 100.0% 153% Salos trend Selling Sales to plant assets ratio Curront ratio Acid-test ratioIIII Merchandise iventory turnover Accounts rocovable tumoverR Total asset turnover Racurn on total assets Raturn on equity 137.0% 25.0% 98%: 133% 35 to 133 to30 to 26 to2.4 toE to 08 to2 to times 9.9 times 67 Dimes7.4 times87 26 times26 mes3.0 times 88% 975% i 150% 2.25% Page 553 Required Use these data to answer each of the following questions with explanations. 1. Is it becoming easier for the company to meet its current liabilities on time and to take advantage of any available ? Explain. 3. Is the company's investment in accounts receivable decreasing? ExplainExplanation / Answer
1. Yes, its becoming easier for the company to meet its current liabilities on time ssince the current ratio is 2.6 times which has improved from 2.4 times of last yr. Company has more than enough liquid assets to pay for its current liabilities on time since idela current ratio is 2times.
2. Yes since the accounts receivable turnover has reduced from 8.2 times to 7.4times to 6.7 times on year on year basis, it is receiving its payments more rapidly & in a shorter time frame than as compared to earlier years.
3. No, since the profit margin of the company is decreasing its investment in the debtors is increasing.
4. Yes, the companys investment in plant assets is increasing since the total asset turnover ratio has remain unchanged even though the sales has increased. So, if the sales has increased & plant turnover ratiohas remained unchanged, the investment would have gone up.
Note: II have answered firsst 4 questions as per Chegg's Policy
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