Which of the Following Ratios Considers the Relationship Between Inventory

question 7

Multiple Choice

Which of the following ratios considers the relationship between inventory and cost of sales?

• A) Inventory turnover ratio
• B) Trade payables ratio
• C) Cost of sales turnover ratio
• D) Trade receivables ratio

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Definitions:

Variable Costs

Costs that change in proportion to the level of output or activity.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Economic Profits

Profits exceeding the total opportunity costs of a business, indicating it is outperforming its next best alternative.

Forgone Entrepreneurial Income

The potential income an entrepreneur misses out on when choosing to start their own business rather than working for wages.