Which of the Following Would Best Indicate That the Firm

question 8

Multiple Choice

Which of the following would best indicate that the firm is carrying excess inventory?

• A) a decline in sales
• B) a decline in the current ratio
• C) a decline in days' sales in inventory
• D) stable current ratio with declining quick ratios
• E) a rise in total asset turnover

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Definitions:

Profit

The financial gain realized when the revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Price-taker Firm

A firm that has no control over the market price and must accept the prevailing market price for its products.

Marginal Revenue

The extra revenue generated by the sale of an additional unit of a product or service.

Marginal Cost

The cost of producing one additional unit of a product or service.