2A2Z MARGE HALIFAX, CHIEF FINANCIAL OFFICER OF STRICKLAND CONSTRUCTIO...
51.
CSO: 2A2b
LOS: 2A2z
Marge Halifax, chief financial officer of Strickland Construction, has been tracking the
activities of the company’s nearest competitor for several years. Among other trends,
Halifax has noticed that this competitor is able to take advantage of new technology and
bring new products to market more quickly than Strickland. In order to determine the
reason for this, Halifax has been reviewing the following data regarding the two
companies.
Strickland
Competitor
Accounts receivable turnover
6.85
7.35
Return on assets
15.34
14.74
Times interest earned
15.65
12.45
Current ratio
2.11
1.23
Debt/equity ratio
42.16
55.83
Degree of financial leverage
1.06
1.81
Price/earnings ratio
26.56
26.15
On the basis of this information, which one of the following is the best initial strategy for
Halifax to follow in attempting to improve the flexibility of Strickland?
a.
Seek cost cutting measures that would increase Strickland’s profitability.
b.
Investigate ways to improve asset efficiency and turnover times to improve
liquidity.
c.
Seek additional sources of outside financing for new product introductions.
d.
Increase Strickland’s investment in short-term securities to increase the current
ratio.