Using the income statement and balance sheet constructed in (1) and (2), compute the following ratios. Compare the results with the industry averages. What strengths and weaknesses are apparent?
RATIO INDUSTRY AVERAGE Current ratio 2:1 Acid test (quick ratio) 1:1 Inventory turnover a. annual sales 2.5 b. cost of goods sold 1.2 Receivables turnover a. annual credit sales 5.0x b. annual sales 6.0x Average collection period 75 days (days sales outstanding) Operating profit margin 26% Net profit margin 19% Return on assets 10% Return on equity 15% Debt/equity 33% Debt ratio (debt/total assets) 25% limes-interest-earned 7.1x ADDITIONAL INFORMATION: last year’s inventory $40,000 credit sales $90,000
Contingency Approaches
Management theories suggesting that there is no one best way to make decisions; rather, the optimal choice depends on the situation.
Transactional Leadership Approaches
Leadership styles focused on the supervision, organization, and group performance, based on a system of rewards and penalties for achieving specific goals.
Trait Approaches
Trait approaches in psychology propose that individual personalities are composed of broad dispositions, and that these traits influence behavior.
Behavioral Leadership Approaches
Theories focusing on the observable behaviors of leaders and how these behaviors influence their effectiveness in guiding and motivating others.