In the Single-Period Model, If Excess Cost Is Double the Shortage

question 104

Multiple Choice

In the single-period model, if excess cost is double the shortage cost, the approximate stockout risk, assuming an optimum service level, is ___ percent.

• A)100
• B)67
• C)50
• D)33
• E)5

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Definitions:

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit sales by analyzing the number of times average accounts receivable are turned over during a period.

Credit Sales

Transactions where the goods or services are provided to the customer with the understanding that payment will be made at a later date.

Short-Term Financial Policy

A strategic approach focusing on managing a company's short-term liabilities and assets, vital for ensuring liquidity and operational efficienc.

Financial Distress

A situation where a company cannot meet or has difficulty paying off its financial obligations to creditors, potentially leading to bankruptcy.