Question Details

The Gift Shoppe's inventory turned over five times 


1.	Which of the following is an example of liquidity analysis?
a.	Bonds payable are divided by total liabilities and stockholders' equity.
b.	Current assets are divided by current liabilities.
c.	Net income is divided by the number of shares of stock outstanding.
d.	Net income is divided by total assets.


	
	2.	Which of the following is considered a liquidity analysis ratio?
a.	return on total assets ratio
b.	quick ratio
c.	dividend yield ratio
d.	return on sales ratio


	

	3.	The Gift Shoppe's inventory turned over five times during the year. Similar gift shops have an inventory turnover equal to ten times per year. What explains the Gift Shoppe's inventory management?
a.	The Gift Shoppe sold too much inventory during the year.
b.	The Gift Shoppe needs to increase sales and decrease the amount of goods on hand.
c.	The Gift Shoppe is performing twice as well as it competitors.
d.	The Gift Shoppe should increase the amount of goods on hand to accommodate the additional inventory demand.


	

	4.	The quick ratio differs from the current ratio in that it
a.	represents the amount of cash on hand instead of the amount of working capital.
b.	is a stricter test of a company's ability to pay its current debts as they are due.
c.	excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible default on payment.
d.	is more difficult to calculate.


	

	5.	Which of the following formulas would be used to determine the inventory turnover ratio?
a.	Net credit sales/Average inventory
b.	Average inventory/Net credit sales
c.	Cost of goods sold/Average inventory
d.	Average inventory/Cost of goods sold




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