Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 3, Problem 7DQ
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)
a.
b. Inventory turnover
c. Fixed asset turnover
d. Debt-to-assets ratio
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
1. Provide a Short-term Solvency Ratio Analysis based on D/E Ratio, Equity Ratio, and Debt ratio.
2. Provide a Long-term Solvency Ratio Analysis based on D/E Ratio and Debt Ratio.
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.Â
Return on investment
Inventory turnover
Fixed asset turnover
Debt-to-assets ratio
The debt ratio is used primarily as a measure of:
Â
Â
Short-term liquidity.
Â
Â
Profitability.
Â
Â
Creditors' long-term risk.
Â
Â
Return on Investment.
Chapter 3 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 3 - If we divide users of ratios into short-term...Ch. 3 - Explain how the Du Pont system of analysis breaks...Ch. 3 - If the accounts receivable turnover ratio is...Ch. 3 - Prob. 4DQCh. 3 - Is there any validity in rule-of-thumb ratios for...Ch. 3 - Why is trend analysis helpful in analyzing ratios?...Ch. 3 - Inflation can have significant effects on income...Ch. 3 - What effect will disinflation following a highly...Ch. 3 - Why might disinflation prove favorable to...Ch. 3 - Comparisons of income can be very difficult for...
Ch. 3 - Low Carb Diet Supplement Inc. has two divisions....Ch. 3 - Database Systems is considering expansion into a...Ch. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Dr. Zhivà€go Diagnostics Corp.’s income...Ch. 3 - The Haines Corp. shows the following financial...Ch. 3 - Easter Egg and Poultry Company has $2,000,000 in...Ch. 3 - Prob. 9PCh. 3 - Prob. 10PCh. 3 - Baker Oats had an asset turnover of 1.6 times per...Ch. 3 - AllState Trucking Co. has the following ratios...Ch. 3 - Front Beam Lighting Company has the following...Ch. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Jerry Rice and Grain Stores has $4,780,000 in...Ch. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Jim Short’s Company makes clothing for schools....Ch. 3 - The balance sheet for Stud Clothiers is shown...Ch. 3 - The Lancaster Corporation’s income statement is...Ch. 3 - Prob. 24PCh. 3 - Prob. 25PCh. 3 - Prob. 26PCh. 3 - Prob. 27PCh. 3 - Prob. 28PCh. 3 - The Global Products Corporation has three...Ch. 3 - Prob. 30PCh. 3 - Prob. 31PCh. 3 - Prob. 32PCh. 3 - Prob. 33PCh. 3 - Prob. 34PCh. 3 - The following information is from Harrelson...Ch. 3 - Using the financial statements for the Snider...Ch. 3 - Given the financial statements for Jones...Ch. 3 - Prob. 2WE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Which of the following ratios is most useful in evaluating solvency? a. Receivables turnover ratio. b. Inventory turnover ratio. c. Debt to equity ratio. d. Current ratio.arrow_forwardThe discount rate used in a net present value analysis is the​ ________.  A. rate of interest earned on a savings account  B. rate of inflation  C. rate of interest charged for debt financing of an investment  D. required rate of return or the hurdle ratearrow_forwardWhich of the ratios listed helps to indicate whether current liabilities could be paid without having to sell the inventory? a.Current ratio b.Profit margin c.Quick ratio d.Debt to equityarrow_forward
- Which one of the following ratios is relevant to assess long-term solvency? A. Current Ratio B. Debt-Service Coverage Ratio C. Return on Equity D. Profit Marginarrow_forwardThe return on assets ratio is a: Group of answer choices A)Liquidity ratio. b)Solvency ratio. C)Profitability ratio. D)Market indicator ratio. e)None of the abovearrow_forwardShort-term creditors would probably most interested in which ratio? a. Current ratio    c. Debt-to-equity ratio b. Earnings per share   d. Quick ratioarrow_forward
- The return on assets ratio is a: Liquidity ratio. Solvency ratio. Profitability ratio. Market indicator ratio. O None of the abovearrow_forwardWhich of these is not a liquidity ratio? Choose Current ratio Asset turnover ratio Inventory turnover ratio Receivables turnover ratio Which of the following usually is least important as a measure of short-termarrow_forwarda.   Compute the following ratios: i.   Accounts Receivable Turnover ratio;ii.   Accounts Payable Turnover ratio;iii.   Average Collection Period;iv.   Average Payable Period;v.   Quick Ratio;vi.   Gross Profit Margin.vii.   Net Profit Marginviii.   Debt ratiob b.   Explain briefly what is factoring?arrow_forward
- Which of the following ratios measures financial leverage? a. The return on assets ratio. b. The inventory turnover ratio. c. The times interest earned ratio. d. The debt to equity ratio.arrow_forwardExplain why a long term creditor should be interested in liquidity ratios. Include some examples or scenarios.arrow_forwardThe ratio that measures how much an investor is willing to pay for a dollar of earnings is known as a _____________ ratio.   A. asset management  B. market value  C. profitabilityarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License