In 20A,C Co

question 125

Multiple Choice

In 20A,C Co.had an inventory turnover ratio of 6.11 while P Co.had a ratio of 10.67.Which of the following might most accurately explain the difference in their ratios?

• A)C Co.had less inventory on hand in relation to their amount of cost of goods sold.
• B)C Co.has a lower sales figure so cost of goods sold is lower leading to a higher turnover ratio.
• C)C Co.takes a longer number of days to sell their inventory.
• D)C Co.has a poor credit rating.

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Definitions:

Purely Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit from the market, leading to price-taking behavior.

Long Run

A period in which all factors of production and costs are variable, allowing complete adjustment to changes.

Accounting Profits

The financial gain calculated by subtracting total expenses from total revenues, according to standard accounting practices.

Long-Run Equilibrium

The state in which all factors of production and costs are variable, and firms earn normal profits in a competitive market.