Question

1. TRUE/FALSE

a. Simply calculating the various ratios tells everything you need to know about a company.

b. You would expect a produce market to have a low inventory turnover ratio.

c. The Acid Test Ratio uses only the most liquid current assets in its calculation.

d. The Current Ratio uses only the most liquid current assets in its calculation.

e. The Inventory Turnover Ratio indicates the number of times Accounts Receivable are turned into cash during the period.

f. The Return on Sales Ratio indicates how much income a company earns on each dollar of sales.

g. Debt management ratios measure how well a company is using debt versus its equity position.

h. The Average Collection Period indicates the number of days that it takes a business to collect its accounts receivable.

i. The Inventory Turnover Ratio indicates the number of times a company sells or turns over its average amount of inventory per year.

Answer 1

A . false.

Everything we can't tell about the company by calculating various ratios.

B. false.

investors don't like to see a low inventory turnover ratio.low inventory turnover indicate bad management,poor purchasing practices etc.

C. true.

Acid test ratio uses only the most liquid current assets in its calculation.

D. false.

current ratio considers all current assets in its calculation.

E. false.

inventory turnover ratio tells that how long it takes for average inventory to leave the bussiness.

F . true.

return on sales ratio indicates how much income a company earns on each dollar of sales.

G . false.

debt management ratio measures how much of a company's operation comes from debt.

H . true.

average collection period indicates number of days that it takes a business to collect its accounts receivable.

I . false .

inventory turnover ratio tells that how long it takes for average inventory to leave the bussiness.