When should an average amount be used for the numerator or denominator?
A) When the numerator is a balance sheet item or items
B) When the denominator is a balance sheet item or items
C) When a ratio consists of an income statement item and a balance sheet item
D) When the numerator is an income statement item or items

Question

Quizplus · Accepted Answer

An average amount should be used for the numerator or denominator when a ratio consists of an income statement item and a balance sheet item, such as inventory turnover or accounts receivable turnover.

When Should an Average Amount Be Used for the Numerator