Scenario 8-2 -In Scenario 8-2, After Analyzing the Current Ratio, You Determined

question 3

Multiple Choice

Scenario 8-2. Denny's Diner is undergoing an analysis of its current financial statements. Denny is interested in seeing how his business compares to the industry. In order to make this comparison, Denny has developed the following ratios. He has come to you for an interpretation of his numbers.
$$\begin{array} { l l l l } &\text { Denny's Diner } & \text { Industry } & \\\text { Current Ratio }& 1.51 & 1.62 \\\text { Average Collection Period } & 2.50 & 5.00 \\\text { Inventory Turnover } & 80 & 75 \\\text { Debt Ratio } &43 \% & 52 \% \\\text { Net Profit Margin } & 10.2 & 8.3 \end{array}$$
-In Scenario 8-2, after analyzing the current ratio, you determined that ______.

• A) Denny has a problem
• B) Denny can cover his current liabilities 1.51 times with his current assets
• C) Denny is too far off of the industry average in this case
• D) Denny has inventory that cannot easily be converted into cash

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Definitions:

Intolerance of Error

An inability or unwillingness to accept mistakes or imperfections, either in oneself or others, often leading to stress or conflict.

Double-Blind Procedure

An experimental method where neither the participants nor the experimenters know who is receiving a particular treatment, to prevent bias.

Subliminal Message

Messages that are designed to pass below the normal limits of perception, intended to influence the subconscious mind without conscious awareness.

Effectiveness

Effectiveness refers to the degree to which a process, action, or intervention achieves its intended outcome or goals under normal or real-world conditions.