Consider the following unrelated business situations. 1. Teresa Chan has asked you about the shares of a

Question:

Consider the following unrelated business situations.
1. Teresa Chan has asked you about the shares of a particular company. She finds them attractive because they have a high yield relative to another company's shares that she is also considering. Explain to her the meaning of the ratio and the danger of making a decision based on it alone. Suggest other information (ratios) Teresa should consider as she makes the investment decision.
2. Saskatoon Plumbing Supplies Ltd.'s owners are concerned because the number of days' sales in receivables has increased over the previous two years. Explain why the ratio might have increased.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...