Davis Corporation, a clothing retailer, engaged in the transactions that follow. Opposite each transaction is a ratio
Question:
Required
Show that you understand the effect of business activities on performance measures by placing an X in the appropriate column to show whether the transaction increased, decreased, or had no effect on the indicatedratio.
Effect Transaction a. Issued common stock for cash b. Declared cash dividend. C. Sold treasury stock. d. Borrowed cash by issuing note payable. Debt to equity ratico e. Paid salaries expense f. Purchased merchandise for cash. g. Sold equipment for cash. h. Sold merchandise on account. i. Paid current portion of long-term debt. Return on assets . Gave sales discount, k. Purchased marketable securities for cash. Quick ratio Ratio Asset turnover Current ratio Return on equity Increase Decrease None Inventory turnover Current ratio Receivables turnover Quick ratio Profit margin Declared 5% stock dividend. m. Purchased a building. Current ratio Free cash flow
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Effect Transaction Ratio Increase Decrease None a Issued common st...View the full answer
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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