Inventory Management and Financial Analysis in Merchandising Quiz

First-In, First-Out method assumes items are sold in the order they are purchased.

Quick ratio measures how well a company can cover its short-term liabilities with its most liquid assets.

Last-In, First-Out method assumes the most recently acquired items are sold first.

Indicates how many times a company sells and replaces its inventory in a given period.

EOQ represents the ideal order quantity that minimizes total inventory costs including ordering and holding costs.

ROE measures a company's profitability relative to shareholders' equity.

Safety stock is held to mitigate the risk of stockouts and meet unanticipated demand.

ROA measures a company's ability to generate profit from its assets.

ABC analysis categorizes inventory based on value to prioritize management attention.

Inventory turnover ratio measures how efficiently a company manages its inventory by comparing sales to average inventory.

Inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory.

LIFO is more commonly used in rising price environments as it results in lower taxable income.

Decreasing inventory turnover ratio suggests slower sales relative to inventory.

A decrease in the current ratio indicates a reduction in a company's liquidity.

Specific Identification method assigns actual costs to each individual inventory item.

High inventory turnover ratio indicates effective management of inventory.