MGMT 200 Purdue Chapter 12

three types of comparisons

between companies, overtime, to industries

what is high receivables turnover ratio indicator of

how effective organization is at collecting from customers

shorter average collection period means

better collection period

high inventory turnover ratio means

it is positive and indicates inventory is selling quickly

average days in inventory companies try to...

minimize number of days they hold inventory

higher current ratio indicates

less risk

higher return on assets indicates

higher amount earned compared to assets that it owns

high profit margin indicates

high amount actually earned

higher returns on equity is

desirable

higher price earnings ratio indicates

investors have a higher expectation of earnings growth

earnings persistence

current earnings that will continue or persist into future years

one time income items

certain items are part of net income in current year but will not persist

discontinued operations

sale or disposal of business component repressing strategic shift that has affected operations and financial result

discontinued operations exampls

major geographical area, major line of business, major investment

conservative accounting Principels result in

lower income, lower assets, higher liabilities

aggressive accounting practices result in

higher income higher assets and lower liabilities