UUP IncIs Very Conservatively Managed and Nothing Ever Changes - Their

question 85

Multiple Choice

UUP Inc.is very conservatively managed and nothing ever changes - their sales are constant over time,the collection periods stay the same,and the firm has not invested in any new assets.An investor is puzzled - she has found the fixed asset turnover rate is changing over time.How can the apparent efficiency with which the firm uses its assets be changing if all other items aren't changing?

• A) This observation is impossible; she must have miscalculated something.
• B) This observation is possible; the fixed asset turnover must increase in this case due to depreciation.
• C) This observation is possible; the fixed asset turnover must decrease in this case due to depreciation.
• D) This observation is possible; she should look at net income and not sales - it is a better measure of the firm's efficiency and productivity.

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Definitions:

Reimburse

To pay back or compensate for money that has been spent or lost.

Days' Sales Uncollected

A fiscal indicator quantifying the mean span of days required for a business to receive payment post a sale transaction.

Net Credit Sales

Net Credit Sales refer to the total value of sales made on credit during a specific period, minus returns and allowances.

Accounts Receivable

The money owed to a company by its customers for goods or services that have been delivered but not yet paid for.