The First Step in Using the Gross Profit Method to Estimate

question 108

Multiple Choice

The first step in using the gross profit method to estimate ending inventory is to:

• A) calculate the cost of goods available for sale.
• B) estimate the ending inventory.
• C) estimate the beginning inventory.
• D) estimate the cost of goods sold.
• E) calculate net income.

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Definitions:

Times-Interest-Earned Ratio

A financial ratio that measures a company's ability to meet its interest payments on outstanding debt.

Debt-to-Equity Ratio

A ratio demonstrating the mix of owner's equity and liabilities in financing the assets of a company.

Quick Ratio

A liquidity measure that evaluates a company's ability to pay off its current liabilities with its most liquid assets, excluding inventories.

Indexed Bonds

Bonds that have their principal amount or interest payments linked to an index, such as inflation or a specific price index, to protect investors from inflation risk.