Financial Management

This is your assignment # 2.

Your essay questions should be answered in a short essay form. And for your problems' answers, just the final number answers will be sufficient. (2 points each question or problem)

- Chapter 4 questions, page 125 (4-2, 4-8)

- Chapter 4 problems, page 126-127 (4-1, 4-5, 4-6, 4-8)

- Chapter 2 questions, page 52 (2-3, 2-8)

- Chapter 6 questions, page 210 (6-3, 6-9)

Chapter 4 questions, page 125 (4-2, 4-8)

4-2. The inventory turnover ratio is defined as sales over inventories; it indicates how often the inventory of a company is being changed out. This ratio is extremely important for a grocery store because the products in a grocery store have strictly defined expiration dates when a store must throw out the unsold products. If a grocery stores inventory turnover ratio is too low, this indicates that the store is holding on to inventory that is too old to be sold and the store will lose profits. For an insurance company, the inventory turnover ratio is not as significant. There really isn’t a major loss if the inventory turnover ratio is not high enough. Also the goods (services) an insurance company sells can be reused or repurposed unlike the food items at a grocery store.

4-8. Within the same industry some of the firm may operate in their growth stage of business life cycle and some may operate in maturity and introduction stage. The size of the firm may also vary from company to company within the same industry. Some firm may diversified their product all around the globes and some may operate locally. All these differentiations affect the company's financial performance. A growing company may have negative cash flow and negative return because of huge investment in fixed assets but a matured company may have positive cash flow. In the above example even though growing company looks weaker it will grow in the future and earned highest return but currently when investor compare these two they will definitely make...