115) Define the following two ratios and briefly discuss the information provided by them:
a. debt ratio
b. times-interest-earned ratio
116) Briefly state the information provided by the following ratios and briefly discuss how they are used in financial analysis:
a. price/earnings ratio
b. dividend yield
117) What is the basic assertion of the efficient capital market theory? What are the implications of an "efficient market" for:
a. managers of companies who want to increase the value of company stock, and
b. investors who are looking for undervalued stocks in which to invest?
118) The following data are taken from the financial statements of Big Cedar Company:
20112010
Average accounts receivable$ 280,000$ 225,000
Net sales 2,985,0002,340,000
70% of sales are on account. Terms for all credit sales are 2/10, n/30.
Instructions
(a) Calculate the accounts receivable turnover and the average collection period for both years.
(b) What conclusion can an analyst draw about the management of the accounts receivable?