The Extent to Which Inventory Financing May Be Used Depends

question 1

Multiple Choice

The extent to which inventory financing may be used depends on:

• A) prime rate of interest.
• B) cost of goods.
• C) how fragile the goods are.
• D) how perishable the goods are.

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Definitions:

Contribution Margin Ratio

The percentage of each sales dollar that contributes toward covering fixed costs and generating profit.

Fixed Monthly Expenses

Recurring expenses that do not change in amount from month to month, such as rent, salaries, and insurance premiums.

Net Operating Income

Income from operations after deducting operating expenses but before interest and taxes.

Variable Cost Per Unit

The cost that changes in proportion to the level of output or activity, calculated on a per-unit basis.