A Firm Is Conducting an Analysis of Trends Over Time

question 85

Multiple Choice

A firm is conducting an analysis of trends over time and discovers that its inventory turnover has declined. This may be due to

• A) an increase in sales.
• B) an increase in cost of goods sold.
• C) an increase in inventory purchases.
• D) a decrease in inventory purchases.

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Definitions:

Year-end UCC

The Undepreciated Capital Cost of an asset at the end of a fiscal year, relevant in tax calculations.

Net Capital Cost

The total cost of purchasing an asset including acquisition costs but net of any deductions, rebates, or subsidies.

Weighted Average Cost of Capital (WACC)

This is the average rate of return a company is expected to pay its security holders to finance its assets. WACC is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital.

Terminal Cash Flow

The final net cash flow in a series of cash flows, representing the net amount received or paid at the conclusion of a project or investment period.