Scenario 8-2. Denny's Diner is undergoing an analysis of its current financial statements. Denny is interested in seeing how his business compares to the industry. In order to make this comparison, Denny has developed the following ratios. He has come to you for an interpretation of his numbers.
$$\begin{array} { l l l l }
&\text { Denny's Diner } & \text { Industry } & \
\text { Current Ratio }& 1.51 & 1.62 \
\text { Average Collection Period } & 2.50 & 5.00 \
\text { Inventory Turnover } & 80 & 75 \
\text { Debt Ratio } &43 \% & 52 \% \
\text { Net Profit Margin } & 10.2 & 8.3
\end{array}$$
-In Scenario 8-2, after analyzing the inventory turnover ratio, you determined that ______.
A) Denny has a problem because this number is so high
B) Denny is turning his inventory over too much
C) Denny is not turning his inventory over enough to be profitable
D) Denny is keeping his inventory current, which is positive due to the nature of his business

Question

Scenario 8-2. Denny's Diner is undergoing an analysis of its current financial statements. Denny is interested in seeing how his business compares to the industry. In order to make this comparison, Denny has developed the following ratios. He has come to you for an interpretation of his numbers.
$$\begin{array} { l l l l } 
&\text { Denny's Diner } & \text { Industry } & \
\text { Current Ratio }& 1.51 & 1.62 \
\text { Average Collection Period } & 2.50 & 5.00 \
\text { Inventory Turnover } & 80 & 75  \
\text { Debt Ratio } &43 \% & 52 \%  \
\text { Net Profit Margin } & 10.2 & 8.3 
\end{array}$$
-In Scenario 8-2, after analyzing the inventory turnover ratio, you determined that ______.
A) Denny has a problem because this number is so high
B) Denny is turning his inventory over too much
C) Denny is not turning his inventory over enough to be profitable
D) Denny is keeping his inventory current, which is positive due to the nature of his business

Quizplus · Accepted Answer

Denny's inventory turnover ratio is higher than the industry average, indicating efficient management of inventory, which is crucial for a diner to ensure freshness and reduce waste.

Scenario 8-2 -In Scenario 8-2, After Analyzing the Inventory Turnover Ratio, You