/*! 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

The following information is from Harrelson Inc.鈥檚 financial statements. Sales (all credit) were $28.50 million for last year.

Sales to total assets

1.90 times

Total debts to total assets

35%

Current ratio

2.50 times

Inventory turnover

10.00 times

Average collection period

20 days

Fixed assets turnover

5.00 times

Fill in the balance sheet:

Cash

Current debts

Account receivable

Long term debts

Inventory

Total debts

Total current assets

Equity

Fixed assets

Total assets

Total debts and equity

We are given the following information for the Pettit Corporation.

Sales (credit)

$3,549,000

Cash

179,000

Inventory

911,000

Current liabilities

788,000

Assets turnover

1.40 times

Current ratio

2.95 times

Debt-to-assets ratio

40%

Receivables turnover

7 times

Current assets are composed of cash, marketable securities, accounts receivable, and inventory. Calculate the following balance sheet items.

b. Marketable securities.

Watt鈥檚 Lighting Stores made the following sales projection for the next six months. All sales are credit sales.

March

\(35,000

April

41,000

May

30,000

June

39,000

July

47,000

August

49,000

Sales in January and February were \)38,000 and $37,000, respectively. Experience has shown that of total sales, 10 percent are uncollectible, 30 percent are collected in the month of sale, 40 percent are collected in the following month, and 20 percent are collected two months after sale.

Prepare a monthly cash receipts schedule for the firm for March through

August.

Of the sales expected to be made during the six months from March through August, how much will still be uncollected at the end of August? How much of this is expected to be collected later?

Inflation can have significant effects on income statements and balance sheets, and therefore on the calculation of ratios. Discuss the possible impact of inflation on the following ratios, and explain the direction of the impact based on your assumptions. (LO3-5)

c. Fixed asset turnover

a. Swank Clothiers had sales of \(383,000 and cost of goods sold of \)260,000. What is the gross profit margin (ratio of gross profit to sales)?

b. If the average firm in the clothing industry had a gross profit of 25 percent,

how is the firm doing?
See all solutions

Recommended explanations on Business Studies Textbooks

Sales in Business

Read Explanation

Organizational Communication

Read Explanation

Intermediate Accounting

Read Explanation

International Business

Read Explanation

Project Planning & Management

Read Explanation

Strategic Analysis

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.