A Firm with a Stockturn Rate of 5 Sells Products

question 14

Multiple Choice

A firm with a stockturn rate of 5 sells products that cost it $100,000. Its annual inventory carrying cost is about 20 percent of the inventory value. What is its annual inventory carrying cost?

• A) $5,000
• B) $4,000
• C) $8,000
• D) $20,000
• E) $100,000

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Definitions:

Non-current Liability

Long-term financial obligations that are due beyond one year or beyond the normal operating cycle.

Cash Equivalents

Short-term, highly liquid investments that can be easily converted into a known amount of cash with minimal risk of changes in value.

Bank Reconciliation

The process of matching and comparing figures from accounting records against those shown on a bank statement to ensure consistency.

Reconciling Information

The process of verifying the accuracy and consistency of two sets of records, identifying and explaining discrepancies to ensure financial records match.