If a Firm Has a Target Inventory of $40,000,a Starting

question 4

Multiple Choice

If a firm has a target inventory of $40,000,a starting inventory of $25,000 and the cost of goods sold is $35000,what is the dollar amount of its purchases?

• A)$15,000
• B)$20,000
• C)$50,000
• D)not enough information is provided.

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Definitions:

Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue, indicating how well assets are being utilized.

Common Size Balance Sheet

A financial statement that displays all items as percentages of a common base figure, allowing for easy comparison across time periods or companies by standardizing the data.

Plant & Equipment

Refers to tangible assets owned by a business used in production or supply of goods and services, not intended for sale.

Total Assets

The sum of all assets owned by a company, including both current and noncurrent assets, representing the total resources available to the firm.