Mark and Amanda Carter Own an Appliance Store and a Restaurant

question 122

Multiple Choice

Mark and Amanda Carter own an appliance store and a restaurant. The appliance store sells merchandise on a 12-month installment plan; the restaurant sells only for cash. (More than one of the following answers may be correct.)

• A) The appliance store has a longer operating cycle than the restaurant.
• B) The appliance store probably uses a perpetual inventory system, whereas the restaurant probably uses a periodic system.
• C) Both businesses require subsidiary ledgers for accounts receivable and inventory.
• D) Both businesses probably have subsidiary ledgers for accounts payable.

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Definitions:

Receivable Turnover

A financial metric that measures how efficiently a company collects on its accounts receivable, calculated as sales divided by accounts receivable.

Inventory Turnover

A ratio showing how often a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.

Times Interest

A financial ratio that measures a company's ability to meet its interest obligations.

Acid-test Ratio

A financial ratio indicating a firm's capacity to settle its short-term obligations without selling its stock.