QUESTIONS AND CORRECT ANSWERS
GRADED A+
● Current ratio (liquidity ratio). Answer: Current assets/current liabilities
● Inventory turnover (liquidity ratio). Answer: Cost of goods sold
(Beginning inventory+Purchases during the period- ending inventory)
/average inventory
● Days in inventory (liquidity ratio). Answer: 365 days/inventory
turnover
● Accounts receivable turnover (liquidity ratio). Answer: Net credit sales
(sales on credit-sales returns-sales allowances)/average net accounts
receivable (beginning AR+ending AR/2)
● Average collection period (liquidity ratio). Answer: 365 days/ accounts
receivable turnover
● Debt to assets ratio (solvency ratio). Answer: Total liabilities/total
assets