Which of the Following Statements Is CORRECT

question 27

Multiple Choice

Which of the following statements is CORRECT?

• A)If a firm has high current and quick ratios, this always indicate that the firm is managing its liquidity position well.
• B)If a firm sold some inventory for cash and left the funds in its bank account, its current ratio would probably not change much, but its quick ratio would decline.
• C)If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would decline.
• D)If a firm sold some inventory on credit as opposed to cash, there is no reason to think that either its current or quick ratio would change.
• E)The inventory turnover ratio and days sales outstanding (DSO) are two ratios that are used to assess how effectively a firm is managing its current assets.

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Definitions:

JIT

Just In Time, a production strategy that aims to reduce in-process inventory and associated carrying costs by producing and delivering products just in time to be sold or used.

Gross Requirements Plan

A schedule that specifies the amount and timing of future material and component requirements necessary to fulfill the production plan.

Net Requirements Plan

An output of the manufacturing planning process that identifies the quantity and timing of future material or product demands based on current inventory levels and scheduled supply.

MRP II

Manufacturing Resource Planning, an integrated method of operational and financial planning for manufacturing companies, an evolution of Material Requirements Planning (MRP).