1. Which of the following types of firms do you expect to have particularly high or low asset turnover? Explain why.
• A supermarket
• A pharmaceutical company
• A jewelry retailer
• A steel company
2. Which of the following types of firms do you expect to have high or low sales margins? Why?
• A supermarket
• A pharmaceutical company
• A jewelry retailer
• A software company
3. James Broker, an analyst with an established brokerage firm, comments: "The critical number I look at for any company is operating cash flow. If cash flows are less than earnings, I consider a company to be a poor performer and a poor investment prospect." Do you agree with this assessment? Why or why not?
5. Joe Investor asserts, "A company cannot grow faster than its sustainable growth rate." True or false? Explain why.
6. What are the reasons for a firm having lower cash from operations than working capital from operations? What are the possible interpretations of these reasons?