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A firm has a year-end retained earnings balance of $220,000 for 2014
A firm has a year-end retained earnings balance of $220,000 for 2014. The firm reported net profits after taxes of $50,000 and paid dividends of $30,000 in 2015. The firm's retained earnings balance at 2015 year end is ______.
Select one:
a. $250,000
b. $270,000
c. $240,000
d. $300,000
======================
______ may indicate a firm is experiencing stockouts and lost sales.
Select one:
a. Average collection period
b. Quick
c. Inventory turnover ratio
d. Average payment period
Expert Solution
1) Retained earnings balance at 2015:
Net profit in 2015 = 50,000
Dividend paid= 30,000
Retained amount in 2015 = Net profit- dividend paid
Retained amount in 2015= 50,000-30,000=20,000
Retained amount in 2015=20,000
Retained earnings in 2014 =220,000
Retained amount in 2015 =20,000
Retained earnings balance at 2015 = 220,000+20,000=240,000
Correct option : c
2) correct option: c ( inventory turnover ratio)
Note :High inventory turnover ratio indicates company is selling inventory quickly
Low inventory turnover ratio indicates weak sales.
High inventory turnover indicates insufficient inventory and this could lead to lost sales.
Low inventory turnover ratio indicates over estimate of demand for it products
High inventory turnover ratio indicates fast moving inventories.
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