Robbins Ltd. is a wholesale distributor of professional equipment and supplies. The company's sales have averaged about

Question:

Robbins Ltd. is a wholesale distributor of professional equipment and supplies. The company's sales have averaged about $900,000 annually for the three-year period 2015-2017. The firm's total assets at the end of 2014 amounted to $850,000. The president of Robbins Ltd. has asked the controller to prepare a report that summarizes the financial aspects of the company's operations for the past three years. This report will be presented to the board of directors at their next meeting. In addition to comparative financial statements, the controller has decided to present a number of relevant financial ratios that can help with identifying and interpreting trends. At the request of the controller, the accounting staff has calculated the following ratios for the 2015-2017 period:

Robbins Ltd. is a wholesale distributor of professional equipment and

In preparation of the report, the controller has decided first to examine the financial ratios independent of any other data to determine if the ratios themselves reveal any significant trends over the three-year period.
Instructions
(a) The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend.
(b) In terms of the ratios provided, what conclusion(s) can be drawn regarding the company's use of financial leverage during the 2015-2017 period?
(c) Using the ratios provided, what conclusion(s) can be drawn regarding the company's net investment in plant and equipment?
(d) Using the activity ratios provided for inventory and accounts receivable, comment on the effectiveness of working capital management.

Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1119048541

11th Canadian edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

Question Posted: