Which of the Following Statements Is CORRECT

question 15

Multiple Choice

Which of the following statements is CORRECT?

• A)A decline in a firm's inventory turnover ratio suggests that it is improving both its inventory management and its liquidity position, i.e., that it is becoming more liquid.
• B)In general, it's better to have a low inventory turnover ratio than a high one, as a low one indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock.
• C)If a firm's fixed assets turnover ratio is significantly lower than its industry average, this could indicate that it uses its fixed assets very efficiently or is operating at over capacity and should probably add fixed assets.
• D)The more conservative a firm's management is, the higher its total debt to total capital ratio is likely to be.
• E)The days sales outstanding ratio tells us how long it takes, on average, to collect after a sale is made. The DSO can be compared with the firm's credit terms to get an idea of whether customers are paying on time.

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Definitions:

Huguenots

Members of the French Protestant group that faced severe persecution in the 16th and 17th centuries, leading many to flee France for other countries.

New France

The area colonized by France in North America from the 16th to the 18th century, including parts of contemporary Canada, the United States, and several Caribbean islands.

Catastrophic Decline

A severe and rapid decrease in the population, quality, or condition of something, often leading to its dire depletion or degradation.