Reference no: EM132913943

Problem 1: You noticed that a fast food restaurant's operating cycle is 30 days. Would this suggest the restaurant is selling food beyond its expiration date?

Select an answer:

Option 1: No, because the operating cycle includes the average collection period, which will be long if the restaurant only takes cash.
Option 2: No, because the operating cycle includes inventory such as boxes, paper cups, and bags in addition to food.
Option 3: No, because 30 days is the average operating cycle for businesses selling nonperishable items.
Option 4: No, because the operating cycle does not start until after the food items are sold.

Problem 2: How does a retail store typically create assets?

Select an answer:

Option 1: by borrowing money from a bank
Option 2: by paying employees
Option 3: by buying inventory
Option 4: by selling inventory

Problem 3: In a common size income statement, how is the gross margin calculated?

Select an answer:

Option 1: income before taxes minus selling expenses
Option 2: total revenues minus the cost of sales
Option 3: cost of sales minus operating income
Option 4: operating income minus net interest expense