ACCT 001 Chapter Notes - Chapter 1: Income Statement, Inventory Turnover, Cash Flow
23 Dec 2020
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Stockholders to estimate future cash flows and risk. Managers to identify areas of weakness and strength. Forecasted current and quick ratios for 2017. Expected to improve but still below the industry average. Firm might have old inventory, or its control might be poor. Dso: average number of days from sale until cash received. Firm collects too slowly, and situation is getting worse. Fa turnover is expected to exceed industry average. Ta turnover not up to industry average. Caused by excessive current assets (a/r and inventory). Recapitalization improved situation, but lease payments drag down ec. What is the company"s rate of return on: Very bad in 2016, but projected to meet or exceed industry average in 2016. Bep removes effect of taxes and financial leverage. Return on assets (roa) and return on equity (roe) Effects of debt on roa and roe. Roa is lowered by debt--interest expense lowers net income, which also lowers roa.
