What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
What is elastic demand? Definition of Elastic Demand Elastic demand is the situation in which demand for a product or service is sensitive to price changes. Elastic demand is a major concern for a manufacturer that...
the corporation first issued the shares of stock. Mark as wrong Mark as right retained earnings This section of stockholders’ equity (and this general ledger account) generally reports the corporation’s cumulative...
. An unrelated customer asks the company to inform them of the price for constructing a specific residence. The company prepares a detailed calculation of the final price that the customer will pay. The price will...
Capital Working capital is actually an amount (rather than a ratio) which is an indicator of a company’s ability to meet its obligations. It is calculated as follows: current assets minus current liabilities. For...
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
is the inventory ______________ ratio. TURNOVER RTNVEOUR Unscramble TURNOVER UTRVRNEO Unscramble 10. The expected selling price in the ordinary course of business minus the estimated costs of completion, disposal, and...
amount of a corporation's retained earnings. BALANCE BECAALN Unscramble BALANCE BACEANL Unscramble 2. The financial statement that reports the liabilities is sometimes known as the statement of financial...
What is the days' sales in accounts receivable ratio? Definition of Days’ Sales in Accounts Receivable The days’ sales in accounts receivable ratio (also known as the average collection period) tells you the...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
Which financial ratios are considered to be efficiency ratios? I consider the efficiency ratios to be the ratios also known as asset turnover ratios, activity ratios, or asset management ratios. These efficiency ratios...
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
margin (gross profit as a percentage of the selling price) is 25% ($25/$100). Example of Calculating the Markup on Cost to Earn a Specified Gross Margin Since you know the cost of a product and you know the gross...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
as current if it is expected to turn to cash within one year or within the operating _________, whichever is longer. CYCLE CECYL Unscramble CYCLE YECLC Unscramble 4. The total amount of current assets divided by the...
A stock split, such as a 2-for-1, means that every stockholder will have twice as many shares as was held previously. Accordingly, the market price per share after the split should be one-half of the market price...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The standards for the direct materials and direct labor should be __________ amounts. Select......
What is the difference between paid-in capital and retained earnings? Definition of Paid-in Capital Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount...
Why aren't retained earnings distributed as dividends to the stockholders? Definition of Retained Earnings Retained earnings is one component of the stockholders’ equity section of a corporation’s balance sheet....
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
of accounting, turnover is used to express the rate at which a company has to replace the employees who leave the company. Examples of Turnover in Financial Ratios The following are a few of the most common financial...
to cash in 10 to 40 days. However, inventory may require several months to be sold and the money collected. Hence, inventory is not considered to be a “quick asset.” To assist in evaluating a company’s liquidity,...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
liabilities of $100,000; noncurrent liabilities of $80,000; and stockholders’ equity of $160,000. What is the company’s current ratio? Select... 0.8 to 1 0.95 to 1 2 to 1 View Coaching Current ratio = current assets...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
What is the fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
= $230,000 – $100,000 = $130,000 . 7. If a company has current assets of $230,000 and current liabilities of $100,000 the company's current ratio is __________ 2.3 Current ratio = current assets / current...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
What is the days' sales in inventory ratio? Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to sell its inventory during a...
, income taxes paid, and retained earnings will be lower because of the higher cost of goods sold Examples of Effect on Financial Ratios from LIFO Instead of FIFO When there is significantly increasing costs, the...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
The situation where the number of units sold is not influenced by a change in selling price. In other words, a price increase does not have a corresponding decrease in the number of units sold.
Featured Review
"There are many resources out here in ‘internet land’, but AccountingCoach has become my go-to for all things accounting. Whether it is a specific accounting question I have, or if it is simply to refresh my brain regarding a cash flow statement, prepaids, deferrals, or all things accrual! I have small-business owners as clients, and I refer them here to learn the basics. What a truly great resource for simple AND more challenging accounting questions. I appreciate you, AccountingCoach!" - Pete
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: