Posted: April 24th, 2017
Scott Ruskin is the CEO of Decatur Materials. The company has
been struggling for the last few years and is in danger of defaulting on several
of its bank loan covenants. Scott is facing significant pressure from the board
of directors to turn the company around. Unless he meets all of the financial
goals for the year, he will be out the door without a golden parachute. To
improve the financial appearance of the company, Scott undertakes a scheme
to boost the balance sheet by faking inventory. The analysis of what financial
ratio would most likely bring this scheme to light?
Collection ratio
Inventory turnover
Profit margin
Instructor Explanation:Wells, Chapter 12, page 335
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