Question

The net income as shown on the common-size income statement of Omega industries for the past three years increased from 3% to 6%. This indicates that the firm is increasing its _____ProfitabilityThe enterprise value multiplier allows for comparing the value of firms with different ______ structures.CapitalIn a financial plan using the percentage of sales approach, why is it assumed that some assets increase with sales?Additional working capital and fixed assets are needed to support growthWhich of the following statements is most likely correct for afirm with days’ sales in receivables for 30 days

Answer 1

Answer:

See explanation section

Explanation:

Req. A & B

If there is an increase in the net income over the year, the company is in profitability condition. As Omega industries are getting increased net income, it suggests their profitability.

EVM or enterprise value multiplier allows a company to compare the capital structure that the company uses. It is commonly used for valuing a business.

Req. C, D & E

In a financial plan, if the sales increase, it should be because of increasing working capital and fixed assets. We know, additional assets can generate more revenues.

A firm can collect approximately 8% of its annual sales at any given time. It can be found through the following way-

since the days' sales in receivables for 30 days in a year, the percentage of annual sales = (30 ÷ 365) × 100 = 8.22% or 8%