The receivable turnover and inventory turnover ratios are used to analyze
A) profitability.
B) liquidity.
C) long-term solvency.
D) leverage.

Question

Quizplus · Accepted Answer

The receivable turnover ratio measures how quickly a company collects payments from its customers, indicating its ability to convert its credit sales to cash. The inventory turnover ratio measures how quickly a company sells its inventory, indicating its ability to manage its inventory efficiently. Both ratios are used as liquidity ratios and help in analyzing a company's ability to meet short-term obligations. Therefore, option B is the correct answer. Option A (profitability) and option D (leverage) are not related to these ratios, and option C (long-term solvency) is more concerned with a company’s ability to meet long-term obligations.

The Receivable Turnover and Inventory Turnover Ratios Are Used to Analyze