The following ratios are available for fast-food competitors and their industry, for a recent year: Instructions (a)
Question:
Instructions
(a) Which company is more liquid? Explain.
(b) Which company is more solvent? Explain.
(c) Which company is more profitable? Explain.
(d) Which company do investors favour? Is your answer consistent with your findings in parts (a) to (c)?
Macs Burgers Kings Industry Avera Current ratio Receivables turnover Inventory turnover 21.5 times 33.6 times 35.2 times Debt to total assets Times interest earned 16.5 times 11.4 times 0 0.9 times 1.2 times Return on assets Return on common shareholders equity 19.6 times 17.6 times 19.9 times Dividend yield
Step by Step Answer:
a Despite the fact that Macs has a higher current ratio one may argue that Macs has less liquidity compared to Kings or the industry average because o...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1118644942
6th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
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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