Which one of the following is TRUE?
A) Fixed assets turnover represents the contribution of every dollar of assets to credit sales.
B) The inverse of the inventory turnover times 365 estimates the number of days to liquidate inventory.
C) The collection period of receivables and payables cannot be inferred from their productivity ratios.
D) Productivity ratios estimate the productivity of borrowed amounts.

Question

Quizplus · Accepted Answer

The inverse of the inventory turnover times 365 (days) estimates the number of days to liquidate inventory. This is known as the inventory conversion period. The other options are incorrect. Fixed assets turnover represents the contribution of every dollar of sales to fixed assets, not credit sales. The collection period of receivables and payables can be inferred from their productivity ratios. Productivity ratios estimate the productivity of assets, not borrowed amounts.

Which One of the Following Is TRUE