Which of the Following Is Used to Determine the Rate

question 149

Multiple Choice

Which of the following is used to determine the rate of inventory turnover?

• A) Cost of goods sold divided by Gross profit
• B) Cost of goods sold divided by Average inventory
• C) Cost of goods sold times Average inventory
• D) Cost of goods sold times Gross profit

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Definitions:

Recognizes Revenue

The process of recording revenue in the financial statements when it is earned and realizable.

Factoring Arrangement With Recourse

A financial transaction where a business sells its receivables to a third party (factor) but must buy back any uncollected receivables, thus bearing the risk of default.

Holdback

A portion of the purchase price of an asset that is withheld until certain conditions have been met, ensuring fulfilment of contractual terms.

Recourse Obligation

A liability that allows lenders to claim assets of the borrower or guarantor, beyond the collateral securing the loan, in case of default.