A financial ratio by itself is of little value. To what can you compare your financial ratios to make them valuable financial planning tools?
What will be an ideal response?
Answer: Financial ratios can be compared to historical ratios, projected or budgeted ratios, expert advice, or industry averages. If I knew my savings ratio for 2013 was 6 percent and my savings ratio for 2015 is 8 percent, then I know I have made an improvement in freeing up cash for savings and investment. If I budgeted my savings ratio for 2015 to be 10 percent and it is currently running at 8 percent, then I know I am not on track to meet my budgeted goals for the year. I can then analyze my income and expenditures to see why I am not on track to meet my goals, or possibly my goals were not realistic based on current conditions. If my savings ratio is currently 8 percent and the experts say that the ideal or average savings ratio should be 15 percent, then I can measure how well I'm doing compared to these benchmarks and adjust accordingly.
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Regarding the Statement of Cash Flow, which of the following is not true regarding operations?
a. A financially healthy company generates sustained cash inflows from selling goods and providing services b. Assessed over several years, the cash flow from operations indicates the extent to which operating activities generate more cash than they use c. A firm can use the excess cash flow from operations to acquire buildings and equipment, pay dividends, retire long-term debt d. A firm cannot use the excess cash flow from operations for investing and financing activities e. All of the above are not true.
Johnny of the Taxi Co, runs a tight business, demands high standards of his drivers and keeps his cabs in excellent working condition
However, he cannot predict when one of his 38 cabs will break down or get a flat tire and how much it will cost the company – not to mention the irate customer. Johnny has ________. a. transaction uncertainty b. buying uncertainty c. market uncertainty d. need uncertainty
Unit labor costs will not rise in unison with compensation rates if gains in __________ outstrip increases in hourly compensation.
Fill in the blank(s) with the appropriate word(s).
Case-Based Critical Thinking QuestionsCase 6-1Margot has just bought a new MP3 player and wants to use it to download and listen to podcasts.Margot does some research and finds that ____ is the most popular and easy to use podcast manager, so she signs up for an account.
A. Apple iTunes B. Juice C. Doppler D. Ziepod