Liquidity Problems Are Likely to Exist for a Company When

question 267

Multiple Choice

Liquidity problems are likely to exist for a company when its acid-test ratio

• A)Is less than the industry average
• B)Is lower than 1 to 1
• C)Is higher than 1 to 1
• D)Is 1 to 1
• E)Is both less than the industry average and lower than 1 to 1

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Definitions:

Ending Inventory

Ending inventory is the total value of goods available for sale at the end of an accounting period, calculated by adding new purchases to beginning inventory and subtracting cost of goods sold.

Periodic LIFO

An inventory valuation method where the last items placed in inventory are the first ones counted as sold, calculated at the end of an accounting period.

Cost of Goods Sold

Represents the direct costs attributable to the production of the goods sold by a company.

Ending Inventory

Ending inventory is the total value of all products, raw materials, and finished goods that are not sold at the end of an accounting period.