/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} 1DQ If we divide users of ratios int... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: 1DQ (page 74)

If we divide users of ratios into short-term lenders, long-term lenders, andstockholders,which ratios would each group be most interested in, and for

what reasons?

Short Answer

Expert verified

Short-term lenders are more interested in the liquidity ratios whereas long-term lenders are interested in the leverage ratios and interest coverage ratios. In addition, the stockholders are interested in the profitability and market ratios to know the profitability of the company.

Step by step solution

01

Short term lenders are interested in liquidity ratios

Short-term lenders are interested in the short-term liquidity ratios because they owed their dues within one year.Therefore, they want to know whether the short-term assets of an organization are adequate to meet the short-term liabilities.

02

Long term lenders are interested in the leverage ratios and interest coverage ratios

Long-term lenders are concerned with the leverage and interest coverage ratios because they owe their dues over the long term.Therefore, they want to know whether the company is over-leveraged and whether the gross income of the company is sufficient to meet the finance cost.

03

Stockholders are interested in the profitability ratios and market ratios

Stockholders are concerned with the profitability ratios and the market ratiosbecause the stockholders want that the organization earn profits consistently over time and generate cash flow to distribute to the stockholders.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.

c. If the firm has an asset turnover ratio of 2.5 times, what is the profit margin

(return on sales)?

Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks down return on stockholders鈥� equity

The balance sheet for Stud Clothiers is shown below. Sales for the year were \(2,400,000, with 90 percent of sales sold on credit.

Stud Clothier

Balance sheet 20X1

Assets

Liabilities and Equity

Cash

\)60,000

Account payable

\(220,000

Account receivable

240,000

Accrued taxes

30,000

Inventory

350,000

Bonds payable (long term)

150,000

Plant and equipment

410,000

Common stock

80,000

Paid in capital

200,000

Retained earnings

380,000

Total assets

\)1,060,000

Total LIbilities and Equity

$1,060,000

Compute the following:

b. Quick ratio.

In January 2007, the Status Quo Company was formed. Total assets were \(544,000, of which \)306,000 consisted of depreciable fixed assets. Status

Quo uses straight-line depreciation of \(30,600 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been \)29,000 per year each of the last 10 years. Other assets have not changed since 2007.

a. Compute return on assets at year-end for 2007, 2009, 2012, 2014, and 2016.

(Use $29,000 in the numerator for each year.)

Identify whether each of the following items increases or decreases cash flow:

Increase in accounts receivable

Decrease in prepaid expenses

Increase in notes payable

Increase in inventory

Depreciation expense

Dividend payment

Increase in investment

Increase in accrued expenses

Decrease in account payable
See all solutions

Recommended explanations on Business Studies Textbooks

Organizational Behavior

Read Explanation

Accounting

Read Explanation

Business Data Analytics

Read Explanation

Business Development

Read Explanation

Managers

Read Explanation

Strategic Direction

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.