A Shortage Occurs in a Replenishment Cycle

question 71

Multiple Choice

A shortage occurs in a replenishment cycle

• A)only if the demand during the lead time exceeds the ROP.
• B)only if the demand during the lead time is less than the ROP.
• C)only if the demand during the lead time exceeds the average demand.
• D)only if the demand during the lead time is less than the average demand.

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Definitions:

Return on Total Assets

A measure of a company's profitability, indicating how effectively it uses its assets to generate earnings.

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.

Accounts Payables

Liabilities representing amounts owed by a company to suppliers or creditors for goods and services received but not yet paid for.

Debt Ratio

Debt divided by total assets. A financial ratio measuring the degree to which the firm uses borrowed money.