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W2 Assignment "Chapter 3 Questions"

Chapter 3 Questions

• Questions 3-3, 3-5, 3-6

3-3

**Over the past years, M. D. Rryngaert & Co. has realized an increase in its current ratio and drop in its total assets turnover ratio. However, the company’s sales, quick ratio, and fixed assets turnover ratio have remained constant. What explains these changes?**

** ****3-5**

**How might (a) seasonal factors and (b) different growth rates distort a comparative ratio analysis? Give some examples. How might these problems be alleviated?**

**Why is it sometimes misleading to compare a company’s financial ratios**** with those of other firms that operate in the same industry?**

** **Problems 3-1, 3-6, 3-11

**3-1- ****Greene Sisters has a DSO of 20 days. The company’s average daily sales are $20,000. What is the level of its accounts receivable? Assume there are 365 days in a year.**

**3-6 ****Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity multiplier?**

**3-11: Complete the balance sheet and sales information in the table that follows for Hoffmeister Industries using the following financial data:**

** **

**Debt ratio: 50%**

**Quick ratio: 0.80**

**Total assets turnover: 1.5**

**Day’s sales outstanding: 36.5 days**

** **

**Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 25%**

**Inventory turnover ratio: 5.0**

**Calculation is based on a 365-day year.**

**discussion:**

Week 2

Please respond to **one** of the following questions:

**Question B **

When reviewing the financial statements of a company, there are many different ratios to choose from. Choose a ratio that looks at liquidity, solvency and profitability and discuss its importance

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