Which of the Following Pairs of Ratios Measure the Profitability

question 39

Multiple Choice

Which of the following pairs of ratios measure the profitability of a company?

• A)Inventory Turnover and Asset turnover
• B)Dividend Payout and Return on Sales
• C)Gross margin and Asset Turnover
• D)Price-Earnings ratio and Accounts Receivable Turnover

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Definitions:

FIFO Method

An inventory valuation method that assumes the first items placed into inventory are the first sold, standing for "First In, First Out."

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set by assigning weights to each number.

Period Costs

Expenses that are not directly tied to the production process and are accounted for in the period they are incurred, such as selling and administrative expenses.

Weighted Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the weighted average cost of all units available for sale during the period.