Scenario 8-2 -In Scenario 8-2, After Analyzing the Net Profit Margin, You

question 55

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 net profit margin, you determined that ______.

• A) Denny has a problem because this number is so high
• B) Denny is generating 10 cents of after-tax profit per each dollar of sales
• C) Denny is generating 10 percent on after-tax profits
• D) Denny should be concerned with management efficiency

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Definitions:

Innovators

Individuals or organizations that introduce new ideas, products, or methods, often leading change in their field.

Skill Variety

The degree to which a job requires a range of different activities and skills to carry out the work effectively.

Employee Involvement Groups

Teams or committees of workers who are involved in making decisions regarding the workplace operations or policies.