Physical Controls Over Inventories Are Important in a Manufacturing Environment

question 49

Multiple Choice

Physical controls over inventories are important in a manufacturing environment because they enhance management's ability to:

• A) produce credible financial reports.
• B) prevent "in-house" losses such as theft and damage of inventory.
• C) detect inefficient or ineffective manufacturing operations.
• D) correct errors resulting from the physical inventory count.

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Definitions:

Acid-test Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets, excluding inventory.