Question

1.1. Which of the following ratios are key components in measuring a company's operating efficiency? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

a. Profit margin
b. Equity ratio
c. Return on total assets
d. Total asset turnover
1.2. Which ratio summarizes the components applicable in 11?
a. Debt ratio
b. Profit margin
c. Return on total assets
d. Total asset turnover
2. What measure reflects the difference between current assets and current liabilities?
a. Gross margin
b. Day's sales uncollected
c. Retun on total assets
3. Which of the following short-term liquidity ratios measure how frequently a company collects its accounts? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)
a. Days' sales uncollected
b. Days' sales in inventory
c. Accounts receivable turnover
d. Acid test rato

Answer 1

1.1 The ratio from the list below which measures the efficiency of the operations of a company is D - Total Asset Turnover Ratio.

Step-by-step explanation:

Total Asset Turn Over Ratio is calculated by dividing Net Sales by Average Total Assets.

For example, if company CDH is reporting a value of $499,650 as initial total assets and $387,656 as ending total assets. Within the same period, the company generated sales of $250,655, with sales returns of $17,000.

This means that, the asset turnover ratio for Company CDH is calculated as follows:

($250,655-$17,000)/(($387,656+$499,650)/2)

The answer is 0.52667

Thus, every dollar in total assets generates $0.52667 in sales.

Efficiency ratios are important for rating the operations of the business. They are also used by investors and lenders when conducting financial analysis of businesses to decide whether the companies are a good investment.

1.2 The component which summarises the components applicable in 1.1 is D Total Asset Turnover

2. Working capital is the variance between current assets and current liabilities.

. This is simply the capital that an organisation uses in its day-to-day business operations.

3. The short-term liquidity ratios which calculate how frequently a company collects its accounts are:

A) Days' sales Uncollected and

C) Accounts receivable turnover.

A) Days' sales Uncollected is calculated by

(Accounts receivable/Net annual credit sales) x 365

It is the number of days before receivables are collected.

The lower the ratio the more liquid the company is likely to be. High Days' Sales Uncollected Ratios are bad for business.

C) Accounts receivable turnover is the annual rate at which a business collects its average accounts receivable.

Cheers!