Identify four ratios that are used to measure how effectively a firm manages its assets, and write out their equations. If one firm is growing rapidly and another is not, how might this distort a comparison of their inventory turnover ratios? If you wanted to evaluate a firm’s DSO, with what would you com- pare it?
What potential problem might arise when comparing different firms’
fixed assets turnover ratios? A firm has annual sales of $100 million, $20 million of inventory, and $30 million of accounts receivable. What is its inventory
turnover ratio? (5) What is its DSO based on a 365-day year?
(109.5 days
