If Operating Income for a Division Is $5,000, Invested Assets

question 42

True/False

If operating income for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

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Definitions:

Acid-Test Ratio

A stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory.

Marketable Securities

Financial instruments that are easily convertible into cash, such as stocks and bonds.

Inventory Turnover Ratio

A measure of how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.

Quantity Discounts

Price reductions given to customers purchasing large volumes.