Which of the Following Financial Ratios Is the Correct Formula

question 20

Multiple Choice

Which of the following financial ratios is the correct formula for the current ratio?

• A) Current assets-inventory/current liabilities
• B) Current assets/current liabilities
• C) Sales/average inventory
• D) Net income/owner's equity

Understand the concept of departmental contribution to overhead and how it is calculated.

Grasp the key performance metrics for investment centers, including profit margin, investment turnover, and return on investment.

Analyze performance using the balanced scorecard.

Calculate departmental income and gross profit for divisions.

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Definitions:

Variable Overhead Efficiency Variance

A measure used to evaluate the efficiency of variable overhead resources used in production relative to the standard consumption expected.

Particular Product

A specific good or service offered by a company, distinct from other offerings within its product line.

Labor Efficiency Variance

measures the difference between the actual hours worked to produce goods and the standard hours expected, multiplied by the standard labor rate.

Direct Labor-Hours

The hours worked by employees directly involved in the production process.