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Chapter 2: Q3-3DQ (page 74)
If the accounts receivable turnover ratio is decreasing, what will be happening to the average collection period?
When the account receivable turnover ratio decreases, the average collection period increases.
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Fondren Machine Tools has total assets of \(3,310,000 and current assets of \)879,000. It turns over its fixed assets 3.6 times per year. Its return on sales is 4.8 percent. It has $1,750,000 of debt. What is its return on stockholders鈥� equity?
If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, which ratios would each group be most interested in, and forwhat reasons?
A firm has sales of \(3 million, and 10 percent of the sales are for cash. The year-end accounts receivable balance is \)285,000. What is the average collection period? (Use a 360-day year.)
Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.
b. If the asset base remains the same as computed in part a, but total asset
turnover goes up to 3, what will be the new return on stockholders鈥� equity?Assume that the profit margin stays the same as do current and long-term
liabilities.
Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.
a. What is the firm鈥檚 return on assets?
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