Martin's Method Acting School Has a Current Ratio of 2

question 337

Multiple Choice

Martin's Method Acting School has a current ratio of 2, a quick ratio of 1.8, net income of $180,000, a profit margin of 10%, and an accounts receivable balance of $150,000. What is the firm's average
Collection period?

• A) 50 days
• B) 43 days
• C) 30 days
• D) 24 days
• E) 16 days

---

Definitions:

Operating Income

A measure of a company's profitability, excluding non-operating expenses such as interest and taxes, and non-operating income.

Finished Goods Inventory

This is the account that contains the cost of finished goods that are ready to be sold but are still in stock.

Absorption Costing

Absorption Costing is a method of inventory costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Operating Income

Profit generated from a company's regular business operations, excluding deductions for interest and taxes.