ABC Analysis Is Based Upon the Principle That

question 114

Multiple Choice

ABC analysis is based upon the principle that:

• A) all items in inventory must be monitored very closely.
• B) there are usually a few critical items, and many items that are less critical.
• C) an item is critical if its usage is high.
• D) more time should be spent on class "C" items because there are many more of them.
• E) as with grade distributions in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items.

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Definitions:

Current Liabilities

Financial obligations a company is required to pay within one year, such as accounts payable and short-term loans.

Accounts Payable

Liabilities owed by a business to its suppliers or vendors for goods and services purchased on credit.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting liabilities, representing ownership interest held by shareholders.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.