Consider the following business situations:
a. Pinehurst Corporation's owners are concerned because the number of days' sales in receivables has increased over the previous two years. Explain why the ratio might have increased.
b. Sara Fulton has asked you about the stock of a particular company. She finds it attractive because it has a high dividend yield relative to another stock she is also considering. Explain to her the meaning of the ratio and the danger of making a decision based on dividend yield alone. Suggest other information (ratios) Sara should consider as she makes her investment decision.
c. Nathanael Smith is the controller of Saturn Ltd., a dance club whose year-end is December 31. Smith prepares checks for suppliers in December and posts them to the appropriate accounts in that month. However, he holds on to the checks and mails them to the suppliers in January. What financial ratio(s) are most affected by the action? What is Smith's purpose in undertaking this activity?