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Questions and Answers
How can management attempt to improve the current ratio near the end of the year?
How can management attempt to improve the current ratio near the end of the year?
- Using cash to pay off short-term debt (correct)
- Increasing long-term debt
- Investing excess cash in long-term assets
- Delaying payments to suppliers
Why might account balances like receivables, payables, and inventories not be representative at year-end?
Why might account balances like receivables, payables, and inventories not be representative at year-end?
- Due to entering into long-term contracts
- Financial year-end coinciding with a low point in activity (correct)
- Excessive use of cash for investments
- Because of high activity in the operating cycle
Why do many analysts exclude one-off or non-recurring items from ratios?
Why do many analysts exclude one-off or non-recurring items from ratios?
- To inflate profitability figures
- To reduce net income
- To improve comparability between entities
- To determine more accurate trends and assess business efficiency (correct)
What factor may hinder meaningful comparisons between competing entities?
What factor may hinder meaningful comparisons between competing entities?
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Why should analysis and interpretation take into consideration modifications, supplementations, and qualifications expressed in accompanying documents?
Why should analysis and interpretation take into consideration modifications, supplementations, and qualifications expressed in accompanying documents?
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