-14 Stanley Comp any had inventory of $220 000 and S180 000 on December 31, 1998

Question

-14 Stanley Comp any had inventory of $220 000 and S180 000 on December 31, 1998, and December 31, 1999, respectively. Cost of goods sold for 1999 was $1,200,000 Average days to sell the inventory is approximately 8. b. 6.0 c. 54.5 d. 6.7 15 Which of the following statements is true? _ a. The price-earnings ratio is a long-term solvency ratio b. High asset turnover is a sign of efficient use of assets. c. The payout ratio measures the profitability of the owners investment d The acid-test ratio applies to manufacturing companies but not to service or retailing businesses 16. When using the direct method to compute cash provided by operations a. income taxes paid may be ignored. b. depreciation expense is added to net income- c. decreases in inven tory are added to total operating expenses to compute cash payments for operating expenses d. increases in accounts receivable are subtracted from total sales to compute cash receipts from customers 17. Profitability ratios include the a times interest earned ratio b. inventory turnover ratio. c. payout ratio d. acid-test ratio. 18. In the statement of cash flows, the activities that affect cash flows are listed in the following order: a. investing, financing, operating b. operating, financing, investing c. financing, operating, investing d. operating, investing, financing 19. A transaction involving a loss on the sale of equipment affects cash provided (used) by a operations and investing activities b. operations and financing activities c. financing activities and investing activities d. operations, financing activities, and investing activities 20. One major purpose of the statement of cash flows is to provide information about a. the firm's profitability b. the firm's cash receipts and payments during a period. c. the firm's resources and claims against those resources d. changes in retained earnings

Explanation / Answer

14. Average days to sell the inventory = Average Inventory / Cost of goods sold x 365

Average Inventory = 220,000 + 180,000 / 2 = 200,000

(200,000 / 1,200,000) x 365 = 60.83

15. Option C

16.Option B

17. Option C

18. Option D

19.Option A

20.Option B

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