1. a. Why is it advantageous to have a high inventory turnover?
b. Is it possible for the inventory turnover to be too high? Discuss.
2. Would a railroad be expected to have a high fixed asset turnover?
3. a. What is financial leverage?
b. What impact does positive leverage have on the rate earned on stockholders' equity compared to the rate earned on total assets?
4. How would the current and quick ratios of a service busi- ness compare?
5. For Lindsay Corporation, the working capital at the end of the current year is $5,000 greater than the working cap- ital at the end of the preceding year, reported as follows:
Current Year Preceding Year
Current assets:
Cash, marketable securities,
|
and receivables
|
$34,000
|
$30,000
|
|
Inventories
|
51,000
|
32,500
|
|
Total current assets Current liabilities
|
$85,000
42,500
|
$62,500
25,000
|
|
Working capital
|
$42,500
|
$37,500
|
Has the current position improved? Explain.