If Two Companies Have the Same Amount of Sales, Why

question 57

Multiple Choice

If two companies have the same amount of sales, why could one company still have more inventory than the other company?

• A) The company with the larger inventory sells its inventory faster.
• B) They are using different inventory systems.
• C) The company with the larger inventory takes longer to sell its inventory.
• D) The company with the smaller inventory uses better discounts.

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Definitions:

Retained Earnings

Profits that a company keeps to use within the business after dividends have been paid out to shareholders.

Fiscal Year

A one-year period used for financial reporting and budgeting, which may or may not align with the calendar year.

Goods Sold

Goods sold refers to the total quantity of goods that a company has sold to its customers during a specific accounting period.

Asset Turnover Ratio

A financial ratio that measures the efficiency of a company at using its assets to generate sales or revenue.