Use the Following Information for Questions

question 49

Multiple Choice

Use the following information for questions.
Nelly Inc. reported net credit sales of $24,000,000 and cost of goods sold of $18,000,000 for the year. The average inventory for the year was $6,000,000.
-Some of the ratios that are used to determine a company's short-term debt paying ability are

• A) asset turnover, times interest earned, current ratio, and receivables turnover.
• B) times interest earned, inventory turnover, current ratio, and receivables turnover.
• C) times interest earned, current ratio, and inventory turnover.
• D) current ratio, receivables turnover, and inventory turnover.

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Definitions:

Salespersons

Individuals employed to sell products or services to customers, often working on commission and responsible for meeting sales targets.

Variable Costing

An accounting method that only includes variable production costs (materials, labor, and overhead) in the cost of goods sold and inventory valuation.

Manufacturing Firms

Companies that use labor, equipment, and raw materials to produce finished goods.

Service Firms

Companies that provide intangible products or services to consumers or other businesses rather than physical goods.