14. Asset Turnover. In each case, choose the firm that you expect to have the
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14. Asset Turnover. In each case, choose the firm that you expect to have the higher asset turnover ratio. (Hint: think about the likely nature of each firm’s business model. For example, would the firm require a lot or a little capital? Would it strive for high sales or high profit margins?) (LO4-3
a. Economics Consulting Group or Home Depot
b. Catalog Shopping Network or Guccic.
c. Electric Utility Co. or Standard Supermarkets
16. A firm has a long-term debt–equity ratio of .4. Shareholders’ equity is $1 million. Current assets are $200,000, and the current ratio is 2. The only current liabilities are notes pay-able. What is the total debt ratio? (LO4-3)
19. Current Ratio. Would the following events increase or decrease a firm’s current ratio? (LO4-3)
a. Inventory is sold.
b. The firm takes out a bank loan to pay its suppliers
.c. The firm arranges a line of credit with a bank that allows it to borrow at any time to pay its suppliers.
d. A customer pays its overdue bills.
e. The firm uses cash to buy additional inventory
20. Financial Ratios. True or false? (LO4-3)
a. A company’s debt-equity ratio is always less than 1.
b. The quick ratio is always less than the current ratio.
c. For a profitable company, the return on equity is always less than the return on assets.