Question

Based on the preceding information, your calculations, and your assumptions, which of the following statements can be included in your analysis report? Check all that apply. A decline in the debt-to-equity ratio implies a decline in the creditworthiness of the firm. A plausible reason why Blue Hamster Manufacturing Inc.’s price to free cash flow ratio has decreased is that investors expect lower cash flow per share in the future. A decline in the inventory turnover ratio could likely be explained by operational difficulties that the company faced, which led to duplicate orders placed to vendors. A decline in the inventory turnover ratio can be explained by the new inventory management system that the company recently adopted, which led to more efficient inventory management.

Answer 1

Answer:

A decline in the debt-to-equity ratio implies a decline in the creditworthiness of the firm

and

A plausible reason why Blue Hamster Manufacturing Inc.’s price to free cash flow ratio has decreased is that investors expect lower cash flow per share in the future

Explanation:

Please refer the calculated ratios below

Ratios Calculated    

                                            Year 1       Year 2 Year 3

Price to cash flow                6.80         4.76         3.81

Inventory turnover                13.60 10.88 8.70

Debt to equity                 0.60 0.48 0.38