The Cash Coverage Ratio Is Used to Evaluate The

question 80

Multiple Choice

The cash coverage ratio is used to evaluate the:

• A)liquidity of a firm.
• B)speed at which a firm generates cash.
• C)length of time that a firm can pay its bills if no additional cash becomes available.
• D)ability of a firm to pay the interest on its debt.
• E)relationship between the firm's cash balance and its current liabilities.

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Definitions:

Perpetual Inventory System

An inventory accounting system where updates are made continuously to the inventory accounts and cost of goods sold as transactions occur.

FIFO

"First In, First Out," an inventory valuation method where the costs of the oldest inventory items are assigned to the cost of goods sold first.

Cost of Goods Sold

The immediate expenses related to producing goods a company sells, encompassing both materials and labor costs.

Gross Profit Method

The gross profit method estimates the cost of ending inventory and cost of goods sold based on a calculated gross profit margin, often used for interim financial reports.