Which Type of Ratio Indicates a Company's Ability to Generate

question 7

Multiple Choice

Which type of ratio indicates a company's ability to generate income in the current period?

• A)Profitability ratios
• B)Liquidity ratios
• C)Solvency ratios
• D)Current ratios

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Definitions:

Autonomous Production Lines

Manufacturing systems that operate with minimal human intervention, using robotic and AI technology to produce goods.

Conversion Cost

The sum of direct labor and manufacturing overhead costs, representing the expense to convert raw materials into finished products.

Average Cost Method

An inventory costing method that calculates the cost of goods sold based on the average cost of all similar items in inventory.

Equivalent Unit

A measure used in cost accounting to express the amount of work done by manufacturers on units that are partially completed at the end of an accounting period.