If the CEO of a Large and Diversified Firm Were

question 118

Multiple Choice

If the CEO of a large and diversified firm were filling out a fitness report on a division manager (i.e. ,"grading" the manager) ,which of the following situations would be likely to cause the manager to receive a better grade? In all cases,assume that other things are held constant.

• A) The division's basic earning power ratio is above the average of other firms in its industry.
• B) The division's total assets turnover ratio is below the average for other firms in its industry.
• C) The division's total debt to total capital ratio is above the average for other firms in the industry.
• D) The division's inventory turnover is 6×,whereas the average for its competitors is 8×.
• E) The division's DSO (days' sales outstanding)is 40 days,whereas the average for its competitors is 30 days.

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Definitions:

Increase

To become progressively greater in size, amount, number, or intensity.

Percent

A part or other object per hundred, used in making comparisons or showing proportion.

CPI

The Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, often used as an indicator of inflation.

Percent Increase

The ratio, expressed as a percentage, by which a quantity increases relative to its original value.