Question

23 The lower the DII and the higher Inventory turns indicates ____________________________________________________________________________________________________________________________________

25. Careful management of DSO can ____________________________________________________________________________________________________________________________________
26. Watching DPO is a way of ensuring that the company ____________________________________________________________________________________________________________________________________
27. What is the formula used to calculate Property, Plant and Equipment turnover (PPE)
28. What affect does leased property have on the PPE calculation?
29. Historically, most businesses have traded in public markets at P/E ratios of __________________

Answer 1

(a).

The lower the DII and the higher Inventory turns indicates that there is huge demand for the products of the company.

Explanation:

DII refers to Days In Inventory.

The DII measures the efficiency of the company's interest in the number of days the company needs to hold the inventory before sale.

(b).

Careful management of DSO can improve the financial position of the company without significant change in its sales or expenditure patterns.

Explanation:

DSO refers to Days Sales Outstanding.

It is the measure for collection of accounts receivables after sales made.

(c)

Watching DPO is a way of ensuring that the company is keep on maintaining the balance between the cash requirements of the company and keeping the vendors satisfied

Explanation:

DPO refers to Days Payable Outstanding.

It is the average number of days in which payments made towards the accounts payable from the data of purchase.

(d)

formula used to calculate Property, Plant and Equipment turnover (PPE):

PPE Turnover ratio = Revenue / PPE

The PPE Turnover ratio indicates the amount of sales achieved for each one dollar of investment made in the PPE.

(e)

Effect of leased property have on the PPE calculation:

The leased property will not be showed up in the balance sheet

Since it is not a component of the PPE segment of the balance sheet, it will not be considered for the computation of PPE which results in multiplied PPE turnover ratio.

Therefore, leased property enhances the PPE turnover ratio of the company.

(f)

PE ratio is the ratio between market price of the security and its earnings per share for the given period

Historically, most businesses have traded in public markets at P/E ratios of 15.