How would you react to the following economic changes and their expected feedback impact on critical financial ratios? We are looking for both analysis and your intelligent reaction.
a. Change—expected weakening economy; your target is the return on assets.
b. Change—expected sharp rise in key input prices; your target is earnings per share.
c. Change—expected rise in short-term interest rates as the Fed tightens; your target is working capital turnover.
d. Change—expect slower consumer spending and anticipated increase in the Fed funds rate; your target is the current ratio.
e. Change—expected slower productivity and thereby rising unit labor costs suggests that EPS may be under downward pressure; your target is the P/E ratio.