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# Inventory and Financial Ratios

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16. Suppose your firm receives a \$5million order on the last day of the year. You fill the order with \$2 million worth of inventory. The customer picks up the entire order the same day and pays \$1 million upfront in cash; you also issue a bill for the customer to pay the remaining balance of \$4 million within 30 days. Suppose your firm's tax rate is 0% (i.e., ignore taxes).

Revenues
increase by \$3 million
increase by \$4 million
increase by \$5 million
increase by \$1 million
decrease by \$2 million

Earnings
increase by \$3 million
increase by \$4 million
increase by \$5 million
increase by \$1 million
decrease by \$2 million

Receivables
increase by \$3 million
increase by \$4 million
increase by \$5 million
increase by \$1 million
decrease by \$2 million

Inventory
increase by \$3 million
increase by \$4 million
increase by \$5 million
increase by \$1 million
decrease by \$2 million
Cash
increase by \$3 million
increase by \$4 million
increase by \$5 million
increase by \$1 million
decrease by \$2 million

12. In July 2005, American Airlines (AMR) had a market capitalization of 2.3 billion, debt of \$14.3 billion and cash of \$3.1 billion. American Airlines had revenues of \$18.9 billion. British Airways, (BAB) had a market capitalization of \$5.2 billion, debt of \$8.0 billion, cash of \$2.9 billion and revenues of \$13.6 billion.

Market capitalization-to-revenue ratio for American Airlines
0.71
0.38
0.76
0.12

Market capitalization-to-revenue ratio for British Airways

0.71
0.38
0.76
0.12

Enterprise value-to-revenue ratio for American Airlines
0.71
0.38
0.76
0.12

Enterprise value-to-revenue ratio for British Airways
0.71
0.38
0.76
0.12

Market capitalization-to-revenue ratio for American Airlines
0.71
0.38
0.76
0.12