Exam Practice Questions

SECTION: A TOPIC: ACTIVITY RATIOS

1. Zubin Corporation experiences a decrease in sales and the cost of good sold, an increase in accounts receivable, and no
change in inventory. If all else is held constant, what is the total effect of these changes on the receivables turnover and
inventory ratios?
a) Inventory turnover decreased; receivables turnover decreased.
b) Inventory turnover increased; receivables turnover decreased.
c) Inventory turnover increased; receivables turnover increased.
d) Inventory turnover decreased; receivables turnover increased.

2. A retail company has experienced rapid growth in sales during the current year. An analyst has calculated the following
ratios for this company.
Prior Year Current Year
Inventory Turnover 5.4 9.3
Receivables turnover 4.2 3.5
Fixed asset turnover 2.4 3.6
Quick ratio 1.5 1.2
Based on the above, the analyst may conclude that sales increased due to more
a) stores open in current year.
b) competitive pricing.
c) favorable credit policies.
d) control over inventory levels.

3. The data presented below shows actual figures for selected accounts of McKeon Company for the fiscal year ended May
31, 20X0, and selected budget figures for the 20X1 fiscal year. McKeon's controller is in the process of reviewing the 20X1
budget and calculating some key ratios based on the budget. McKeon Company monitors yield or return ratios using the
average financial position of the company. (Round all calculations to three decimal places if necessary.)
May 31, 20X1 May 31, 20X0
Current assets $210,000 $180,000
Noncurrent assets 275,000 255,000
Current liabilities 78,000 85,000
Long-term debt 75,000 30,000
Common stock ($30 par value) 300,000 300,000
Retained earnings 32,000 20,000

20X1 Operations
Sales* $350,000
Cost of goods sold 160,000
Interest expense 3,000
Income taxes (40% rate) 48,000
Dividends declared and paid in 20X1 60,000
Administrative expense 67,000
*All sales are credit sales.

Composition of Current Assets

May 31, 20X1 May 31, 20X0

Cash $ 20,000 $10,000
Accounts receivable 100,000 70,000
Inventory 70,000 80,000
Other 20,000 20,000
$ 210,000 $180,000

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 The 20X1 accounts receivable turnover for McKeon Company is
a) 1.882
b) 3.500
c) 5.000
d) 4.118

4. Same Data as in Q.3.

Using a 365-day year, McKeon's days' sales in inventory is
a) 183 days.
b) 171 days.
c) 160 days.
d) 78 days.

5. Same Data as in Q.3.

McKeon Company's total asset turnover for 20X1 is
a) 0.722
b) 0.761
c) 0.805
d) 0.348

6. The following inventory and sales data are available for the current year for Volpone Company. Volpone uses a 365-day
year when computing ratios.
Nov 30, 2012 Nov 30, 2011
Net credit sales $6,205,000
Gross receivables 350,000 320,000
Inventory 960,000 780,000
Cost of goods sold 4,380,000
Volpone Company's average number of days to collect accounts receivable for the current year is
a) 19.43 days.
b) 18.87 days.
c) 21.17 days.
d) 19.71 days.

7. Peggy Monahan, controller, has gathered the following information regarding Lampasso Company.
Beginning of the year End of the year
Inventory $6,400 $7,600
Accounts receivable $2,140 $3,060
Accounts payable $3,320 $3,680
Total sales for the year were $85,900, of which $61,400 were credit sales. The cost of goods sold was $24,500. Lampasso's
inventory turnover ratio for the year was
a) 8.9 times.
b) 3.2 times.
c) 3.5 times.
d) 8.2 times.

8. Same Data as in Q.7.

Total sales for the year were $85,900, of which $62,400 were credit sales. The cost of goods sold was $24,500. The
company's payable turnover was
a) 6.7 times.
b) 17.8 times.
c) 7.0 times.
d) 16.9 times.

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9. Lowell Corporation has decided to include certain financial ratios in its year-end annual report to shareholders. Selected
information relating to its most recent fiscal year is provided below.
Cash $10,000
Accounts receivable (end of year) 20,000
Accounts receivable (beginning of year) 24,000
Inventory (end of year) 30,000
Inventory (beginning of year) 26,000
Notes payable (due in 90 days) 25,000
Bonds payable (due in 10 years) 35,000
Net credit sales for year 220,000
Cost of goods sold 140,000
Using a 365-day year, compute Lowell's accounts receivable turnover in days.
a) 36.5 days.
b) 39.8 days.
c) 26.1 days.
d) 33.2 days.

10. In computing inventory turnover, the base to use is the

a) Cost of sales base because it eliminates any changes due solely to sales price changes.
b) Sales base because it is more likely to reflect a change in trend.
c) Sales base because it provides turnover rates that are considerably higher.
d) Sales base because it more clearly represents operational activity.

11. Cornwall Corporation's net accounts receivable were $68,000 and $47,000 at the beginning and end of the year,
respectively. Cornwall's condensed Income Statement is shown below.
Sales $900,000
Cost of goods sold 527,000
Operating expenses 175,000
Operating income 198,000
Income tax 79,000
Net income $119,000
Cornwall's average number of days' sales in accounts receivable (using a 360-day year) is
a) 13 days.
b) 8 days.
c) 23 days.
d) 19 days.

12. A growing company is assessing current working capital requirements. An average of 58 days is required to convert raw
materials into finished goods and to sell them. Then an average of 32 days is required to collect on receivables. If the
average time the company takes to pay for its raw materials is 15 days after they are received, then the total cash
conversion cycle for this company is:
a) 90 days.
b) 11 days.
c) 41 days.
d) 75 days.

13. Lancaster Inc. had net accounts receivable of $168,000 and $147,000 at the beginning and end of the year, respectively.
The company’s net income for the year was $204,000 on $1,700,000 in total sales. Cash sales were 6% of total sales.
Lancaster's average accounts receivable turnover ratio for the year is
a) 10.15.
b) 10.79.
c) 10.87.
d) 9.51.

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14. Following is the statement of financial position of Lisa Inc. as on Dec 31. (amount in thousands):
ASSETS: 20X4 20X3
Current Assets:
Cash $30 $25
Trading securities 20 15
Accounts receivable (net) 45 30
Inventory (at lower of cost or market) 60 50
Prepaid items 15 20
Total Current Assets $170 $140
Long-term Assets:
Available-for-Sale $25 $20
Land (At cost) 75 75
Building (net) 80 90
Equipment (net) 95 100
Patents (net) 35 17
Goodwill (net) 20 13
Total Long-term Assets $330 $315
TOTAL ASSETS $500 $455

LIABILITIES & EQUITY

Current Liabilities:
Notes payable $23 $12
Accounts payable 47 28
Accrued interest 15 15
Total current liabilities $85 $55
Long-term Liabilities:
Long-term Notes Payable 10% due 12/31/20X6 $10 $10
Bonds Payable 12% due 12/31/20X9 15 15
Total Long-term Liabilities $110 $80
Shareholders’ Equity:
Preferred stock - 5% cumulative, $100 par, nonparticipating
authorized, issued and outstanding, 1,000 shares $100 $100
Common stock - $10 par 20,000 authorized shares,
15,000 issued and outstanding 150 150
Additional paid-in capital – common 75 75
Retained earnings 65 50
Total Equity $390 $375
TOTAL LIABILITIES & EQUITY $500 $455
Assume net credit sales were $300,000 for 20X4. Lisa Inc.'s average collection period for 20X4, using a 360 -day year, was
a) 54 days. c) 61 days.
b) 36 days. d) 45 days.

15. Same Data as in Q.14.

Assume net credit sales and cost of goods sold for 20X4 were $300,000 and $220,000 respectively. Lisa Inc.'s accounts
receivable turnover for 20X4 was
a) 5.9 times. c) 8.0 times
b) 6.7 times. d) 4.9 times

16. Same Data as in Q.14.

Assume sales and cost of goods sold for 20X4 were $300,000 and $220,000, respectively. Lisa Inc.'s inventory turnover,
using a 360-day year, was
a) 5.0 times. c) 4.0 times.
b) 4.4 times. d) 3.7 times.

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17.Same Data as in Q.14.
Lisa Inc.'s acid test (quick) ratio at December 31, 20X4 was
a) 1.8
b) 1.1
c) 0.6
d) 2.0

18. Accounts receivable turnover will normally decrease as a result of

a) An increase in cash sales in proportion to credit sales.
b) A change in credit policy to lengthen the period for cash discounts.
c) A significant sales volume decrease near the end of the accounting period.
d) Write-off of an uncollectible account (assume the use of the allowance for doubtful accounts method)

19. The days' sales in receivables ratio will be understated if the company
a) Uses a natural business year for its accounting period.
b) Uses average receivables in the ratio calculation.
c) Uses a calendar year for its accounting period.
d) Does not use average receivables in the ratio calculation.

20. To determine the operating cycle for a wholesaler, which one of the following pairs of items is needed?
a) Accounts receivable turnover and inventory turnover.
b) Asset turnover and return on sales.
c) Days' sales in accounts receivable and average merchandise inventory.
d) Cash turnover and net sales.

21. The following financial information is given for Anjuli Corporation (in millions of dollars).
Prior Year Current Year
Sales $10 $11
Cost of goods sold 6 7
Current Assets:
Cash 2 3
Accounts receivable 3 4
Inventory 4 5
Between the prior year and the current year, did the days sales in inventory and days sales in receivables for Anjuli
increase or decrease? Assume a 365-day year.
a) Days sales in inventory decreased; days sales in receivables decreased.
b) Days sales in inventory decreased; days sales in receivables increased.
c) Days sales in inventory increased; days sales in receivables decreased.
d) Days sales in inventory increased; days sales in receivables increased.

22. The ratio that measures a firm's ability to generate earnings from its resources is
a) Sales to working capital.
b) Asset turnover.
c) Days' sales in receivables.
d) Days' sales in inventory.

23. All other things being equal, which one of the following factors would result in an increase in cash reported on the balance
sheet from one period to the next?
a) Increase in the speed with which accounts payable invoices are paid.
b) Increase in the level of inventory held.
c) Decrease in the accrued vacation liability.
d) Reduction of days’ sales outstanding of accounts receivable.

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24. When a balance sheet amount is related to an income statement amount in computing a ratio,
a) The balance sheet amount should be converted to an average for the year.
b) Both amounts should be converted to market value.
c) Comparisons with industry ratios are not meaningful.
d) The income statement amount should be converted to an average for the year.

25. Maydale Inc.'s financial statements show the following information.

Accounts receivable, end of Year 1 $320,000
Credit sales for Year 2 3,600,000
Accounts receivable, end of Year 2 400,000
Maydale's accounts receivable turnover ratio is
a) 9.00.
b) 0.10.
c) 11.25.
d) 10.00.

26. On its year-end financial statements, Caper Corporation showed sales of $3,000,000, net fixed assets of $1,300,000, and
total assets of $2,000,000. The company's fixed asset turnover is
a) 66.7%.
b) 43.3%.
c) 2.3 times.
d) 1.5 times.

27. Makay Corporation has decided to include certain financial ratios in its year-end annual report to shareholders. Selected
information relating to its most recent fiscal year is provided below.
Cash $10,000
Accounts receivable (end of year) 20,000
Accounts receivable (beginning of year) 24,000
Inventory (end of year) 30,000
Inventory (beginning of year) 26,000
Notes payable (due in 90 days) 25,000
Bonds payable (due in 10 years) 35,000
Net credit sales for year 220,000
Cost of goods sold 140,000
Makay's average inventory turnover for the year was
a) 5.0 times.
b) 5.4 times.
c) 4.7 times.
d) 7.9 times.

28. A financial analyst is analyzing the accounts receivable period for three companies by comparing their days’ sales in
receivables. The financial analyst has collected the following information for the companies.
Company A Company B Company C
Net credit sales $175,000 $145,000 $225,000
Average accounts receivable, net 10,000 20,000 11,500
Average allowance for uncollectible accounts 3,500 6,500 4,500
If each of the companies has credit terms of net 30 days, the financial analyst is most likely to conclude which one of the
following?
a) Company C is less efficient than Company A in collecting payment.
b) Company B is the least efficient in collecting payment.
c) Company A is the most efficient in collecting payment.
d) Company B is more efficient than Company C in collecting payment.

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29. Using the data presented below, calculate the cost of sales for the Beta Corporation for the past year.
Current ratio 3.5
Acid test ratio 3.0
Current liabilities at year end $600,000
Beginning inventory $500,000
Inventory turnover 8.0
a) $2,400,000
b) $1,600,000
c) $3,200,000
d) $6,400,000

30. Spotech Co.'s budgeted sales and budgeted cost of sales for the coming year are $212,000,000 and $132,500,000,
respectively. Short-term interest rates are expected to average 5%. If Spotech could increase inventory turnover from its
current 8 times per year to 10 times per year, its expected cost savings in the current year would be
a) $250,000
b) $165,625
c) $331,250
d) $82,812

31. A company had $6 million in credit sales last fiscal year. The company’s beginning accounts receivable balance was $1
million and its ending receivable balance was $1.25 million on its year-end financial statements. If the industry average
period for the collection of accounts receivables is 90 days, the company’s accounts receivable collection period is less
than the industry average by approximately
a) 68 days.
b) 60 days.
c) 52 days.
d) 22 days.

32. Globetrade is a retailer that buys virtually all of its merchandise from manufacturers in a country experiencing significant
inflation. Globetrade is considering changing its method of inventory costing from first-in, first-out (FIFO) to last-in, first-
out (LIFO). What effect would the change from FIFO to LIFO have on Globetrade’s current ratio and inventory turnover
ratio?
a) The current ratio would decrease but the inventory turnover ratio would increase.
b) The current ratio would increase but the inventory turnover ratio would decrease.
c) Both the current ratio and the inventory turnover ratio would decrease.
d) Both the current ratio and the inventory turnover ratio would increase.

33. Garland Corporation's Income Statement for the year just ended is shown below.
Net sales $900,000
Cost of goods sold:
Inventory – beginning $125,000
Purchases 540,000
Goods available for sale 665,000
Inventory – ending 138,000
Cost of goods sold 527,000
Gross profit 373,000
Operating expenses 175,000
Income from operations $198,000
Garland's average inventory turnover ratio is
a) 4.01.
b) 3.82.
c) 6.84.
d) 6.52.

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34. The assets of Moreland Corporation are presented below.
January 1 December 31
Cash $48,000 $62,000
Marketable securities 42,000 35,000
Accounts receivable 68,000 47,000
Inventory 125,000 138,000
Plant & equipment 325,000 424,000
(net of accumulated depreciation)
For the year just ended, Moreland had net income of $96,000 on $900,000 of sales. Moreland's total asset turnover ratio is
a) 1.50.
b) 1.27.
c) 1.48.
d) 1.37.

35. A wholesale supplier has collected the following financial data on three companies that only purchase their products for
resale to retail consumers.
Company A Company B Company C
Sales £1,000,000 £1,250,000 £2,450,000
Gross profit margin 20% 30% 25%
Beginning inventory £35,000 £80,000 £155,000
Ending inventory £65,000 £225,000 £175,000
On the basis of the information provided above, the supplier is able to conclude that
a) Companies A and C are both turning the product inventory faster than Company B.
b) Company C is turning the product inventory the fastest.
c) Companies B and C are both turning the product inventory faster than Company A.
d) Company B is turning the product inventory the fastest.

36. Locar Corporation had net sales last year of $18,600,000 (of which 20% were installment sales). It also had an average
accounts receivable balance (including the installment receivables) of $1,380,000. Credit terms are 2/10, net 30. Based on
a 360-day year, Locar’s average collection period last year was
a) 27.3 days.
b) 33.4 days.
c) 26.2 days.
d) 26.7 days.

37. The annual sales revenue of an enterprise is $3,000,000. Half of the sales are on credit terms; half are cash sales. Accounts
receivable at the balance sheet date are $165,000. What is the average receivables collection period, to the nearest day,
using a 365 day year?
a) 20 days
b) 9 days
c) 18 days
d) 40 days

38. Selected financial information for Markum Industries is listed as follows:

Cost of Goods Sold $315,000
Net Sales Revenue $750,505
Beginning Inventory Balance $54,000
Average Accounts Receivable $72,000
Ending Inventory Balance $22,000
Compute Markum's inventory turnover.
a) 8.3 times
b) 19.8 times
c) 14.3 times
d) 5.8 times

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39. The Statement of Financial Position for King Products Corporation for the fiscal years ended June 30, Year 2, and June 30,
Year 1, is presented below. Net sales and cost of goods sold for the year ended June 30, Year 2, were $600,000 and
$440,000, respectively.

King Products Corporation's average collection period for the fiscal year ended June 30, Year 2, using a 365-day year, was:
a) 45.6 days.
b) 36.5 days.
c) 54.5 days.
d) 91.3 days.

40. Which of these would cause inventory turnover to increase the most?
a) Keeping the amount of inventory on hand constant but increasing sales
b) Keeping the amount of inventory on hand constant but decreasing sales
c) Increasing the amount of inventory on hand
d) Decreasing the amount of inventory on hand and increasing sales

41. Clauson Inc. grants credit terms of 1/15, net 30 and projects gross sales for next year of $2,000,000. The credit manager
estimates that 40% of their customers pay on the discount date, 40% on the net due date, and 20% pay 15 days after the
net due date. Assuming uniform sales and a 365-day year, what is the projected days sales outstanding (rounded to the
nearest whole day)?
a) 27 days.
b) 30 days.
c) 15 days.
d) 24 days.

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42. What can cause a decrease in inventory turnover?
a) Increasing the amount of average inventory
b) Decreasing the amount of average inventory
c) Increasing cost of goods sold
d) Increasing sales commissions

43. A company reported net sales in 20x4 of $5,258,135,179 and cost of goods sold of $2,349,135,497. The company also
reported the following balances:
January 1 December 31
Accounts receivables $246,179,366 $179,348,617
Inventories $64,346,349 $72,349,769
Determine the inventory turnover for 20x4, rounding to two decimal places.
a) 36.51 times
b) 32.47 times
c) 24.71 times
d) 34.37 times

44. Same Data as in Q.43.

Determine the accounts receivable turnover ratio, rounding to two decimal places.
a) 24.71 times
b) 21.36 times
c) 34.37 times
d) 29.32 times

45. Early in 20x7, Rivers Company switched to a JIT (just-in-time) inventory system. Financial information for the two most
recent years is listed in the following table.

How many times did inventory turnover increase by as a result of the switch to the JIT system?
a) 1.3 times
b) 2.7 times
c) 0.5 times
d) 1.0 times

46. Selected information from the comparative financial statements of Faure Company for the year ended December 31,
appears here:

Compute the company's accounts receivable turnover for 20x4.

a) 7.39 times
b) 6.65 times
c) 6.00 times
d) 7.00 times

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47. Ottoman Manufacturing Company reported net sales (all credit) of $120,000 and $140,000 for 20x3 and 20x4,
respectively, and net income of $24,000 and $32,000 for 20x3 and 20x4, respectively. It also reported gross profit margin
of 58% and 56% for 20x3 and 20x4, respectively. Ottoman's 20x3 and 20x4 balance sheets appear here:

Calculate the inventory turnover for 20x4, rounding to two decimal places.
a) 2.70 times
b) 2.05 times
c) 2.12 times
d) 3.52 times

48. Same Data as in Q.43.

Calculate the average days in inventory for 20x4, rounding to two decimal places.
a) 172.17 days
b) 165.91 days
c) 178.05 days
d) 135.19 days

49. Blaney Clothing Store had a balance in the accounts receivable account of $437,500 at the beginning of the year and a
balance of $500,000 at the end of the year. Net credit sales during the year amounted to $3,000,000. The average
collection period of the receivables in terms of days was
a) 53.2 days.
b) 57.0 days.
c) 6.4 days.
d) 60.8 days.

50. Early in 20x7, Grover Company switched to a JIT (just-in-time) inventory system. Financial information for the two most
recent years is listed here:

By how many days did the days in inventory ratio decrease as a result of the switch to the JIT system?
a) 292.0 days
b) 204.4 days
c) 515.3 days
d) 730.0 days

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51. Devlin Company's inventory turnover for the year ended May 31, Year 2, was:

a) 3.67 times.
b) 3.88 times.
c) 1.94 times.
d) 4.13 times.

52. Four companies each have a credit term period of 30 days. Based on each company's net credit sales and average net
accounts receivable for 20x8, which company is having the most problem collecting their accounts receivable?
Net Credit Sales Average Net Accounts Receivable
Company 1 $2.6 million $198,000
Company 2 $150,000 $12,000
Company 3 $490,000 $27,000
Company 4 $1.4 million $153,000
a) Company 1
b) Company 2
c) Company 3
d) Company 4

53. Monroe Company has net credit sales of $126,545 for the most recent fiscal year. Beginning and ending accounts
receivable were $12,905 and $10,062, respectively. Compute Monroe's accounts receivable turnover.
a) 9.8 times
b) 11 times
c) 12.6 times
d) 5.5 times

54. What does days in inventory measure?

a) The average length of time inventory is held before it is sold
b) The number of times a company's inventory is sold per year
c) The amount of net income generated by the average inventory balance
d) Gross profit percentage

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55. The financial statements of Baker Company report net sales of $500,000 and accounts receivable of $10,000 and $15,000
at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in
days?
a) 7.3 days
b) 9.1 days
c) 11.0 days
d) 18.3 days

56. Fess Hardware Store had net credit sales of $8,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts
Receivable balances at the beginning and end of the year were $600,000 and $760,000, respectively. The accounts
receivable turnover was
a) 14.2 times.
b) 12.5 times.
c) 11.2 times.
d) 7.4 times.

57. In 20x7, Russell Candies had a cost of goods sold of $382,490, beginning inventory of $2,508, and ending inventory of
$3,000. What was Russell's average days in inventory for 20x7?
a) 2.4 days
b) 2.9 days
c) 2.6 days
d) 138.9 days

58. Flicker Company reports net credit sales of $422,040 for its most recent fiscal year. Its beginning and ending accounts
receivable balances, respectively, are $34,985 and $42,995. What is Flicker's average collection period?
a) 67.4 days
b) 37.2 days
c) 33.8 days
d) 30.2 days

59. What is the average days to sell inventory for Marlin Music given the following information?

a) 147.2 days
b) 320.2 days
c) 160.7 days
d) 173.8 days

60. Artemis Inc. has the following information:

What is the average days to sell inventory for Artemis?

a) 66.1 days
b) 53.7 days
c) 130.4 days
d) 83.0 days

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61. The financial statements of Baker Company report net sales of $500,000 and accounts receivable of $10,000 and $15,000
at the beginning of the year and end of the year, respectively. What is the average collection period for accounts
receivable in days?
a) 11.0 days
b) 7.3 days
c) 40.0 days
d) 9.1 days

62. Determine inventory turnover for 20x7 for Morgan Sellers given the following information:

a) 2.35 times
b) 3.55 times
c) 1.37 times
d) 3.41 times

63. Last year, Johnson Company's days sales outstanding was 73 days. This year, days sales outstanding is 91.25 days. Over
the same time period, sales have declined by 20%. In this period of time, what has happened to the level of Johnson
Company's accounts receivable?
a) Accounts receivables have increased.
b) There is not enough information provided to make a determination.
c) Accounts receivable have decreased.
d) There has been no change in accounts receivable.

64. The financial statements of the Harrison Company report net sales of $200,000 and accounts receivable of $10,000 and
$5,000 at the beginning of the year and end of year, respectively. What is the accounts collection period for accounts
receivable in days?
a) 9.1 days
b) 18.3 days
c) 13.7 days
d) 27.4 days

65. Metal Works is comparing itself to one of its peers, Montana Industries. Metal Works’ accounts receivable turnover ratios
are presented here.

Over the 9-year period from 20x1 to 20x9,

a) Metal Works has more days of sales outstanding in 20x9 compared with 20x1.
b) Montana has reduced accounts receivables relative to sales over this period.
c) Montana has become more efficient at managing its receivables progressively over this period.
d) Metal Works has fewer days sales outstanding in 20x9 compared with 20x1.

66. The average length of time inventory is held before it is sold is called
a) days in inventory.
b) inventory turnover.
c) average inventory.
d) cost of goods sold.

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67. Peachtree Manufacturing had a balance in the accounts receivable account of $735,000 at the beginning of the year and a
balance of $840,000 at the end of the year. Net credit sales during the year amounted to $5,040,000. The average
collection period of the receivables in terms of days was
a) 60.8 days.
b) 6.4 days.
c) 53.2 days.
d) 57.0 days.

68. Highland Industries had net credit sales of $21,600,000 and cost of goods sold of $18,000,000 for the year. The average
inventory for the year amounted to $3,000,000. The average number of days in inventory during the year was
a) 6.0 days.
b) 60.8 days.
c) 50.7 days.
d) 304.2 days.

69. New Circle Industries had net credit sales of $15,120,000 and cost of goods sold of $12,600,000 for the year. The average
inventory for the year amounted to $2,100,000. The average number of days in inventory during the year was
a) 304.2 days.
b) 50.7 days.
c) 6.0 days.
d) 60.8 days.

70. Early in 20x7, Stevenson Incorporated switched to a JIT (just-in-time) inventory system. Financial information for the two
most recent years is listed here:

How many times did inventory turnover increase as a result of the switch to the JIT system?
a) 14.4 times
b) 7.0 times
c) 26.1 times
d) 9.7 times

71. What does inventory turnover measure?

a) The average length of time inventory is held before it is sold
b) The number of times a company's inventory is sold per year
c) The amount of net income generated by the average inventory balance
d) Gross profit percentage

From the Desk of MUHAMMAD USAMA MOOSANI Page 15