Explain the purpose of the inventory turnover ratio? Is it possible for a firm to have a high current ratio and still have difficulty paying its current bills? Why or why not?
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- Explain the purpose of the inventory turnover ratio?
- Is it possible for a firm to have a high current ratio and still have difficulty paying its current bills? Why or why not?
Step by step
Solved in 3 steps
- If inventory prices are rising, which inventory costing method should produce the smallest payment for taxes?Why are perpetual inventory systems more expensive to operate than periodic inventory systems? What conditions justify the additional cost of a perpetual inventory system?What does a very high inventory turnover ratio signify? Please provide your own example to explain your point.
- Which of the following is true about the quick ratio? O It is a liquidity ratio. It measures the ability of the firm to pay off its short-term obligations without relying on inventory. OIt cannot exceed the current ratio. It is also called the acid-test ratio. All of the above answers are correct.Which of the following is not a disadvantage of the LIFO inventory cost flow assumption? a. The impact of LIFO liquidation profits b. It does not match the most recent costs with revenue c. The possibility of income manipulation by management d. It impairs comparability between companies using LIFOWhat does a low ratio in Creditors Turnover Ratio indicate? a. Company collects the money fast from Debtors b. It shows the speed at which the inventory will be converted into sales c. Company is delaying the payment to the creditors d. Company is making the payment to the creditors very promptly
- Explain how LIFO, FIFO, and Weighted average inventory systems will have different affects on a firm’s income statement and balance sheet. If a firm was concerned about reducing their tax burden, which inventory system would best benefit them? Assume costs have been steadily rising over time.In what ways would a reduction in inventory help the companyWhich of the following statements is most correct? Select one: A. A company with a current ratio of 0.5, should purchase additional inventory on credit if it wants to improve this ratio. B. Return on assets is a function of two variables, the profit margin and current asset turnover. C. A company with a current ratio of 0. 5, should sell some of the existing inventory at cost if it wants to improve this ratio. D. Firms with low rates of return on stockholders’ equity tend to sell at relatively high ratios of market price to book value.
