Q: Under U.S. GAAP, the statement of cash flows
Under U.S. GAAP, the statement of cash flows classifies cash expenditures for interest on debt as an operating activity but classifies cash expenditures for dividends to shareholders as a financing ac...
See AnswerQ: The statement of cash flows classifies changes in accounts payable as an
The statement of cash flows classifies changes in accounts payable as an operating activity but classifies changes in short-term bank borrowing as a financing activity. Explain this apparent paradox....
See AnswerQ: Given how financial leverage affects ROE, why does a firm not
Given how financial leverage affects ROE, why does a firm not borrow as much as possible? That is, why doesn’t a firm increase borrowing to as close to 100% of financing as it can?
See AnswerQ: “Financial ratios are useful metrics for relating two items in the
“Financial ratios are useful metrics for relating two items in the financial statements. Interpreting changes in a particular financial ratio is difficult, however, because the explanation might relat...
See AnswerQ: In calculating return on assets, the simple ROA formula does not
In calculating return on assets, the simple ROA formula does not adjust for interest expense. Explain why is it technically more correct to make an adjustment for interest expense in calculating this...
See AnswerQ: A firm’s total assets turnover decreased, but its accounts receivable,
A firm’s total assets turnover decreased, but its accounts receivable, inventory, and fixed asset turnover increased. Suggest possible explanations.
See AnswerQ: Explain why the return on equity of a company that has no
Explain why the return on equity of a company that has no preferred stock will be smaller than the return on equity of an otherwise similar firm that has preferred stock.
See AnswerQ: One company president stated, “The operations of our company are
One company president stated, “The operations of our company are such that we must turn our assets over once every four weeks.” A company president in another industry stated, “The operations of our c...
See AnswerQ: Some have argued that for any given firm at a particular time
Some have argued that for any given firm at a particular time, there is an optimal inventory turnover ratio. Explain.
See AnswerQ: A Japanese car manufacturer (JCM) reported Sales of Products of
A Japanese car manufacturer (JCM) reported Sales of Products of ¥22,670 billion for the year ended March 31, Year 7. The Cost of Products Sold was ¥18,356 billion. Assume that JCM made all sales on cr...
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