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Flashcards in Ratio Analysis Deck (11):
1

Inventory turnover increased from 8 to 12

larger percentage of sales in the last month leads a lower ending inventory,

thus increasing the inventory turnover ratio since the denominator of the fraction becomes smaller

2

Return on equity dropped from .8 to .5

retention of profits increases the shareholders' equity, thereby decreasing the ratio

3

Current Ratio dropped from 2 to 1.4

long-term debt becoming current

4

Decrease in Gross Margin from 28% to 24%

inability to pass on increases in costs will decrease the gross margin because cost of goods sold as a percentage of sales will increase

5

Decrease in Debt to Equity Ratio

Principal LT Debt payment or profit increases the total equity and thereby increases the denominator of the debt to equity ratio.

6

Decrease in quick Ratio

the increase in current debt increases the denominator of the quick ratio and thereby decreases the ratio.

7

Increase in Days sales in A/R

Larger % of sales happened in the last month than from prior year

8

Decrease in Operating Profit Margin

Operating expenses increased at a higher rate then sales revenue

9

Debt to equity decreased

Capital stock was issued

10

Gross profit percentage decreased

Manufacturing costs decreased less than sales decreased during the year

11

Days sales in A/R Increase

Fraudulent sales being recorded