5) A high inventory turnover may indicate that a company is experiencing difficulty selling its inventory.
6) A ratio can be expressed as a proportion, a rate, or a percent.
7) A profitability ratio measures the income or operating success of a company for a given period of time.
8) The larger the working capital, the better the ability to pay debts.
9) Cash, short-term investments and net current receivables are all components of the acid-test ratio.
10) Inventory turnover is calculated by dividing the cost of goods sold by the average receivables.
11) Ratios that test liquidity include all of the following EXCEPT:
A) acid-test ratio.
B) current ratio.
C) debt to total assets.
D) inventory turnover.
12) To compute operating income (profit) percentage, divide:
A) sales by cost of goods sold.
B) gross profit by net sales.
C) net income by stockholders' equity.
D) operating income by net sales.
13) A measure of a company's ability to collect cash from credit customers is the:
A) accounts receivable turnover.
B) earnings per share.
C) inventory turnover.
D) acid-test ratio.
14) Kaufman's Department Store had net sales of $20 million and cost of goods sold of $14 million for the year. The average inventory for the year was $4 million. What was the average number of days in inventory?
A) 46
B) 104
C) 92
D) 52
