The Inventory Turnover Ratio Compares

question 4

Multiple Choice

The inventory turnover ratio compares:

• A) current assets to average inventory.
• B) cost of goods sold to average inventory.
• C) average receivables to average inventory.
• D)average assets to average inventory.

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Definitions:

Period Costs

Period costs are expenses that are not directly tied to the production process and are expensed in the period they are incurred.

Selling Expenses

Costs incurred directly and indirectly in selling products or services, including commissions, advertising, and salesperson salaries.

Administrative Expenses

Costs of overall administration and general operations, such as salaries of executive officers and costs of general services.

Controlling

The process of establishing standards, comparing actual performance against these standards, and taking corrective action to ensure objectives are met.