Scenario 8-2 -In Scenario 8-2, After Analyzing the Inventory Turnover Ratio, You

question 59

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 inventory turnover ratio, you determined that ______.

• A) Denny has a problem because this number is so high
• B) Denny is turning his inventory over too much
• C) Denny is not turning his inventory over enough to be profitable
• D) Denny is keeping his inventory current, which is positive due to the nature of his business

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Definitions:

Third-Person Effect

The belief that others are more affected by media messages and propaganda than oneself, often leading to an underestimation of the effect on oneself.

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Communications designed to influence the attitudes, beliefs, or behaviors of the receiver.

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The act of speaking to a live audience in a structured, deliberate manner to inform, influence, or entertain.

Intelligent Audience

An audience that is perceived to be capable of understanding and processing complex information and messages.