Which of the Following Statements Best Describes Inventories

question 49

Multiple Choice

Which of the following statements best describes inventories?

• A) A reduction in inventories held would have no effect on the current ratio.
• B) An increase in inventories would have no effect on the current ratio.
• C) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
• D) A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.

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Definitions:

Benefits-Received Principle

A taxation theory stating that individuals should pay taxes in proportion to the benefits they receive from government services.

Gasoline Tax

A levy imposed by governments on the sale of gasoline, often used to fund transportation infrastructure and environmental initiatives.

Corporate Income Tax

A tax on the profit of a corporation, where the tax rates can vary based on a country's tax laws and the company's income levels.

Regressive Tax

A tax levied in a way where the rate of taxation diminishes as the taxable amount gets larger.