None Assume that a firm's total assets and sales remain constant. Would an increase in each of the ratiosbelow be associated with a cash inflow or a cash outflow?a. Current ratiob. Inventory turnoverC. Average collection periodd. Average payment periode. Debt ratiof. Net profit marginStep-by-step solutionStep 1 of 3Cash inflows: Cash inflows are the funds received by firm within a given period of time.Cash outflows: Cash outflows are the total outgoing funds from a business organization in a givenperiod of time. It represents all the expenditures made by firm over a specific time period.

"Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Assume that a firm's total assets and sales remain constant. Would an increase in each of the ratios below be associated with a cash inflow or a cash outflow? a. Current ratio b. Inventory turnover c. Average collection period d. Average payment period e. Debt ratio f. Net profit margin

Assume that a firm's total assets and sales remain constant. Would an increase in each of the ratios below be associated with a cash inflow or a cash outflow? a. Current ratio b. Inventory turnover c. Average collection period d. Average payment period e. Debt ratio f. Net profit margin

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 20MCQ

See similar textbooks

Related questions

Q: The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's a net cash…

A: Ratio analysis means where different ratio of various years of years companies has been compared and…

Q: How is the short term debt repayment capacity of a company is assessed ? Choose the INCORRECT OPTION…

A: Current ratio is the ratio of current assets to the current liabilities.

Q: All are financial measures, except: A. Market share B. Revenue growth C. Earnings per share D.…

A: Solution: All are financial measures, except "Reduction of past due accounts".

Q: Price-earnings ratio is computed by dividing annual dividends by average market value per share.…

A: Formula to compute Price -Earning ratio is: Price -Earning ratio =Market price per shareEarning per…

Q: Indicate the effect of the transactions listed in the following table on total current assets,…

A: A cash dividend is declared and paid: Cash is decreasing. Which means current assets decrease and…

Q: Internal Growth Rate (IGR) Net Income ($) Total dividend paid ($) Retention ratio (%) Total assets…

A: Besides borrowing, the rate at which an organization can grow is known as the sustainable growth…

Q: How does current ratio and quick ratio relate to a firm's financial profitability?

A: Current ratio and quick ratio are indirectly related to a firm's financial profitability.

Q: How to Compute the following ratios i. Gross Profit % ii. Operating profit % iii. Net Profit % iv.…

A: There are different types of ratios used to measure the financial stability of the company, some of…

Q: An analyst has calculated a ratio using as the numerator the sum of operating cash fl ow, interest,…

A: This ratio is interest coverage ratio It is the profitability and debt ratio which helps to identify…

Q: Which of the following ratios is most useful in evaluating solvency? a. Receivables turnover ratio.…

A: Solvency ratios disclose the firm's ability to meet its long-term liabilities as and when they…

Q: The ________ is a measure of a company's ability to pay its current liabilities from cash and cash…

A: Cash conversion cycle is a working capital metric which expresses how many days it takes a company…

Q: The percentage of credit sales approach is closely related to the: a.statement of retained…

A: The percentage of credit sales approach is used to estimate the expected bad debt expenses in the…

Q: Which of the following statements accurately describes the statement of cash flows? A. It…

A: The statement of cash flows records all the sources and use of the cash in the business during a…

Q: What does it indicate when Cash flow ratios in a. Performance Ratios such as Cash flow to revenue,…

A: Financial Ratios It is important for the business entity to measure the ratio which can be determine…

Q: Which of the following is a cash outflow? a. an increase in fixed asset b. an increase in inventory…

A: Cash is an asset for a corporation that is used in the operations and business activities for which…

Q: When is the forecasted growth rate in residual operating income the same as the forecasted growth…

A: The income generated in excess of the minimum rate of return refers to the residual income. The…

Q: Which of the following ratios measures financial leverage? a. The return on assets ratio. b. The…

A: Answer: d. The debt to equity ratio.

Q: Operating expenses are on the Statement of Cash Flows. True False Question 6 Which of the following…

A: This question has two parts: First part is True or False statement Second part is multiple choice…

Q: The company’s profitability on each dollar invested in assets is represented by which of the…

A: The correct option is option “C”. Return on assets.

Q: A measure of profitability analysis is a. times interest earned. b. cash flow per share.…

A: Evaluation of profitability: In general, financial ratios are used to evaluate capabilities,…

Q: Current Ratio is a measure used to assess the liquidity of the company, computed as current assets…

A: Current ratio is the ratio of a current asset versus a current liability. As defined in working…

Q: Which of the following is true of the statement of cash flows? A It covers a span of time and is…

A: Cash flows show the information about the position of cash (inflow and outflow) of the specific time…

Q: What do the liquidity ratios tell you In the financlal analysis? 1 The capital structure of a…

A: SOLUTION- LIQUIDITY RATIO- IT ANALYSE THE VARIOUS CURRENT ASSETS AND CURRENT LIABILITIES OF THE…

Q: Return on sales RoA-Operational RoA-Total Management Performance

A: Accounting Ratios are the tools used to interpret the financial statements of a corporation in an…

Q: Ratios that measure liquidity include all of the following except:a. the leverage ratio.b. inventory…

A: Liquidity means short term cash position of the company. To measure liquidity, some ratios are:…

Q: Requirement 1. Compute the FINANCIAL ratios that measure a. Liquidity • Current ratio • Quick ratio…

A: As per our guidelines, we are supposed to answer only 3 sub parts. For balance answer, please…

Q: Which of the following ratios helps in measuring the long term solvency of the company? Current…

A: Requirement ÷ratio helps in measuring the long term solvency of the company ANSWER ÷ correct…

Q: If a company has a current ratio of 1.5:1, what effects will the borrowing of cash by long-term debt…

A: Current ratio- It is ratio of current assets and current liabilities. It shows current assets are…

Q: Which of the following financial measures are used to determine a company's credit rating? a)A…

A: Company's credit rating - is a rating which determines the credit worthiness of a company i.e., it…

Q: Determine whether each of the following changes in risk ratios is good news or bad news about a…

A: Receivables turnover ratio: Receivables turnover ratio is mainly used to evaluate the collection…

Q: An analyst has calculated a ratio using as the numerator the sum of operating cash fl ow, interest,…

A: The capacity to pay off the interest costs from its earnings is the Interest Coverage Ratio. It is…

Q: Which of the following is considered a use of cash in a cash flow statement? Increase in accrued…

A: Cashflow statement is the financial statement which shows cash inflows and cash outflow activities…

Q: A. Calculate the operating section of cash flow using the direct method with the information…

A: cash flow from operating activity using direct method : under direct method; cash received from…

Q: Explain the major financial ratios and financial cycles, debt ratio, debt to equity ratio, return on…

A: Step 1 Hello. Since your question has multiple parts, we will solve first question for you. If you…

Q: The analysis of a firm's liquidity includes all of the following except Multiple Choice Current…

A: The liquidity ratio indicates the liquid on the business entity. It includes ratios is like current…

Q: Which of the following is an advantage of EV/EBITDA ratio compared with P/E ratio? A. EV/EBITDA…

A: Financial ratios are the measures that are used in the financial analysis of a corporation, and are…

Q: A common measure of liquidity is a.the asset turnover ratio b.the accounts receivable turnover…

A: Assets turnover ratio means how many times sale is , as compared to average assets. Account…

Q: 1- Calulate the following liquidity ratio: a. Current Ratio b. Quick Ratio 2-Calulate the…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Indicate whether the following are a measure of (a) liquidity, (b) profitability, or (c) leverage.…

Q: ratios compare current assets to current liabilities to indicate the speed with which a company can…

A: Current assets are those assets which is converted in to cash with in 12 months and current…

Q: ______ ratios are used to measure the speed in which various assets are converted into sales or cash

A: A firm can convert its assets into cash. Those assets that can be converted into cash within a short…

Q: A ratio that can be useful in analyzing a company's cash and liquidity is the operating cash flow…

A: Operating Cash Flow ratio helps in analyzing the ability of the firm to pay off its liabilities from…

Q: The numerator for the quick ratio is calculated by: Select one: a. Deducting inventory and prepaid…

A: The question is related to Ratio Analysis. The Quick Ratio is sometimes called the "acid-test" ratio…

Q: Assess the company’s level of liquidity and comment on its ability to meet its short-term financial…

A: By the given balance sheet and other comprehensive income statement we will calculate and process…

Q: Assess the company’s level of liquidity and comment on its ability to meet its short-term financial…

A: “Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

None

Assume that a firm's total assets and sales remain constant. Would an increase in each of the ratios
below be associated with a cash inflow or a cash outflow?
a. Current ratio
b. Inventory turnover
C. Average collection period
d. Average payment period
e. Debt ratio
f. Net profit margin
Step-by-step solution
Step 1 of 3
Cash inflows: Cash inflows are the funds received by firm within a given period of time.
Cash outflows: Cash outflows are the total outgoing funds from a business organization in a given
period of time. It represents all the expenditures made by firm over a specific time period.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's a net cash flow from operating activities by: A) Current liabilities at the beginning of the period B) Current liabilities at the end of the period C) Total liabilities at the middle of the period D) Average current liabilities for the period
The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents. A. cash conversion cycle B. cash ratio C. gross profit D. debt equity ratio
Which of the following is a series of constant cash flows that occur at the end of each period for some fixed number of periods .... A. Annuity B. Mezzanine Debt C. Perpetuity D. Original Investment
Assume a firm generates $2,200 in slaes and has a $300 increase in accounts recieveables during an accoutning period. Based soley on this information, cash flow will increase by ? Please explain.
An analyst has calculated a ratio using as the numerator the sum of operating cash fl ow, interest, and taxes and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indicate? A . Th is ratio is an interest coverage ratio, measuring a company’s ability to meet its interest obligations and indicating a company’s solvency.
Match the words to the definitions. Solvency Accounts Receivable Balance Sheet Noncurrent Assets Income Statement Retained Earnings Noncurrent Liabilities. Liquidity Current Assets Cash Flow Statement ✓ [Choose ] A forecast of the amount and timing of future cash inflows and outflows over some period of time. A summary of the revenues and expenses of a business over a given period of time. When net worth is greater than zero, or assets are greater than liabilities on the balance sheet. The ability to meet the day-to-day cash needs of the firm. Profits that are not paid out in dividends but are reinvested in the firm itself. Summarizes a firm's financial position at a given point in time and lists the firm's assets, liabilities, and net worth. Debts that others owe the business, usually arising from previous credit sales. Something the firms owns or uses that will not turn into cash within the next accounting period. Either cash or an items that will become cash in the next accounting…
When calculating an i* value, all net positive cash flows are assumed to be reinvested at:a. the current market interest rate.b. the i* rate.c. the company’s MARR.d. the company’s cost of capital.
An analyst has calculated a ratio using as the numerator the sum of operating cash fl ow, interest, and taxes and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indicate? C . Th is ratio is an operating profi tability ratio, measuring the operating cash fl ow generated accounting for taxes and interest and indicating a company’s liquidity.
a. Explain Cash Flow Statement, what are different cash flow classifications, define and differentiate with examples. 3 b. XYZ, Inc., has Total Assets equal to your $ ID, total assets turnover is 1.5, and D/E ratio of 1.5. If its Return to equity ratio is 20 percent, what is its net income? 7
Please answer the following question. In this method, the company compares the amount spent on the investment with the discounted expected future cash inflows. a.Payback b.NRV c.Investment d.IRR
In a construction cash flow statement which of the following workingcapital account represents a source of cash of the firm? A. Decrease in Accounts Receivable.B. Increase in Accounts Receivable.C. Decrease in Accounts Payable.D. Decrease in accrued Taxes Payable.
The term "additional funds needed (AFN)" is generally defined as follows: a. A forecasting approach in which the forecasted percentage of sales for each balance sheet account is held constant. b. The amount of assets required per dollar of sales. c. Funds that are obtained automatically from routine business transactions. d. Funds that a firm must raise externally from non-spontaneous sources, i.e., by borrowing or by selling new stock to support operations. e. The amount of internally generated cash in a given year minus the amount of cash needed to acquire the new assets needed to support growth.