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Peregrine -Foundations of Business Finance and Verified Answers
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Peregrine -Foundations of Business Finance and Verified Answers
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Peregrine -Foundations of Business Finance and VerifiedAnswers
occur when depreciation and other noncash charges during the period are greater than the
net loss. The
statement of cash flows treats net income (or net losses) and depreciation and other noncash
charges as
separate entries.
A decrease in an asset (such as inventory) is an __________ of cash because cash that has
been tied up
in the asset is released and can be used for some other purpose, such as repaying a loan. -
✔✔inflow
An increase in inventory (or any other asset) is an __________ of cash because additional
inventory ties
up more of the firm's cash. - ✔✔outflow
Logic suggests that if net income is a cash __________, then a net loss (negative net profit
after taxes) is
a cash __________. - ✔✔inflow, outflow
The __________ __________, one of the most commonly cited financial ratios, measures the
firm's
,ability to meet its short-term obligations. It is defined as current assets divided by current
liabilities. -
✔✔current ratio
__________ __________ provides a measure of how quickly a firm sells its goods. -
✔✔Inventory
turnover
Inventory turnover can easily be converted into a(n) __________ __________ __________
__________
by dividing the turnover figure into 365 (the number of days in a year). - ✔✔average age of
inventory
Firms use the __________ __________ __________ or __________ __________ __________
__________ __________ in evaluating credit and collection policies. - ✔✔average collection
period,
average age of accounts receivable
Firms use the __________ __________ __________ to evaluate their payment performance.
This metric
measures the average length of time it takes a firm to pay its suppliers. - ✔✔average payment
period
, The __________ __________ __________ __________ measures the efficiency with which a
firm uses
its fixed assets. The ratio tells analysts how many dollars of sales a firm generates per dollar of
investment in fixed assets. - ✔✔fixed asset turnover ratio
The __________ __________ __________ __________ indicates the efficiency with which a
firm uses all
its assets to generate sales. - ✔✔total asset turnover ratio
__________ __________ focus on income statement measures of a firm's ability to generate
sufficient
cash flow to make scheduled interest and principal payments. - ✔✔Coverage ratios
__________ __________ measure the proportion of total assets financed by a firm's creditors.
The
higher this ratio, the greater is the firm's reliance on borrowed money to finance its activities.
- ✔✔Debt
ratios
A close cousin of the debt ratio is the __________-__________-__________ __________,
sometimes
called the __________ __________. This ratio is calculated as total assets divided by common
stock
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