Response to the following problem:
As chief financial officer of Jumbo Corporation, you have calculated the following ratios and percentages of the company's financial information to enable you to answer questions the board of directors may ask at their next meeting.
|
|
2018
|
2017
|
2016
|
|
Current ratio
|
3.1:1
|
2.6:1
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2.0:1
|
|
Acid-test ratio
|
0.8:1
|
1.2:1
|
1.5:1
|
|
Accounts receivable collection period
|
93 days
|
76 days
|
64 days
|
|
Number of days of sales in inventory
|
88 days
|
72 days
|
68 day s
|
|
Return on shareholders' equity
|
12.0%
|
13.3%
|
14.1%
|
|
Return on total assets
|
12.6%
|
12.8%
|
13.3%
|
|
Percentage sales increase over prior year
|
123%
|
118%
|
100%
|
|
Selling expenses to net sales ratio
|
13.9%
|
13.9%
|
14.2%
|
Required:
Using these ratios, answer each question with a brief explanation to support each answer.
1. Is it becoming easier than in previous years for the company to take advantage of cash discounts offered by suppliers?
2. Is the company collecting its accounts receivable more rapidly than before?
3. Is the company's investment in accounts receivable decreasing?
4. Is the company's investment in inventory increasing?
5. Is the shareholders' return on investment increasing?
6. Did the dollar amount of selling expenses decrease during the three-year period?